Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Xin Net Corp.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1)Title of each class of securities to which transaction applies:
Common
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2)Aggregate number of securities to which transaction applies:
41,360,010
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3)Per unit price or other underlying value of transaction computed pursuant to
Exchange Act rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
----------------------------------------------------------------
4)Proposed maximum aggregate value of transaction:
N/A
----------------------------------------------------------------
Xin Net Corp.
#950-789 W. Pender St.
Vancouver, B.C. Canada V6C 1H2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON ___________________, 2003
Notice is hereby given that the Annual Meeting of Shareholders of Xin Net
Corp., (hereinafter referred to as "the Company") will be held at #950-789 West
Pender St., Vancouver, B.C. V6C 1H2, at 10:00 AM, local time, on ______________,
2003 for the following purposes:
1. To elect five directors to hold office until the next annual
meeting of shareholders and qualification of their respective
successors.
2. To authorize the sale of Xin Net Telecom Corp., the domain name
registration business of the Company to a non-affiliated party
("Sino-i.com Limited") pursuant to an Agreement dated February 26,
2003.
3. To approve the "Assets Transfer Agreement" signed on June 22,
2001, which transfers Company ISP assets to Beijing Sino Soft
Intel Information Technology Ltd.
4. To approve the Amendment of the Articles of Incorporation to
increase the authorized capital to 300 million common shares
$.001 par value and 300 million preferred shares $.001 par value
in such classes or series and with such rights and privileges as
the board may hereafter determine.
5. To ratify Clancy & Co. as the company auditors for year ended
December 31, 2003.
6. To transact such other business as may properly come before the
Annual Meeting or any postponement of or adjournment thereof.
The Board of Directors has fixed the closing of business on ______________,
2003, as the record date for the determination of shareholders entitled to
notice of and to vote at this meeting or any adjournment thereof. The stock
transfer books will not be closed.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 2002 and Interim Report for 2nd Quarter 2003 accompany this Notice
of Annual Meeting and Proxy Statement.
All stockholders, whether or not they expect to attend the Meeting in
person, are requested to complete, date, sign, and return the enclosed form of
proxy in the accompanying pre-addressed envelope. The proxy may be revoked by
the person executing the proxy by filing with the Secretary of the Company an
instrument of revocation or duly executed proxy bearing a later date, or by
electing to vote in person at the Meeting.
/s/ Angela Du
----------------------------------
Xin Net Corp.
Angela Du, President
PROXY STATEMENT
Xin Net Corp.
#950-789 West Pender St.
Vancouver, BC Canada V6C 1H2
ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
On ____________________, 2003
This Proxy Statement is being furnished to the shareholders of Xin Net
Corp., a Florida corporation, in connection with the solicitation by the Board
of Directors of proxies to be used at the Annual Meeting of Shareholders to be
held at 10:00 AM, local time, ____________, 2003 at #950-789 West Pender Street,
Vancouver, BC Canada. The Proxy Statement is first being sent or given to
shareholders on or about _________________, 2003.
PROXIES ARE BEING SOLICITED BY THE BOARD OF DIRECTORS.
WE ARE ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED TO SEND US A PROXY.
VOTING RIGHTS
Stockholders of record of the Company as of the close of business on
September 29, 2003 have the right to receive notice of and to vote at the Annual
Meeting. On December 31, 2002, the Company had issued the outstanding 41,360,010
shares of Common Stock (the "Common Stock"), the only class of voting securities
outstanding. Each share of Common Stock is entitled to one (1) vote for as many
separate nominees as there are directors to be elected and for or against all
other matters presented. For action to be taken at the Annual Meeting, a minimum
of ten percent (10%) of the shares entitled to vote must be represented at the
Annual Meeting in person or by proxy. Shares of stock may not be voted
cumulatively. Abstentions and broker non-votes each will be included in
determining the number of shares present and voting at the Annual Meeting.
Abstentions will be counted in tabulations of the votes cast on proposals,
whereas broker non-votes will not be counted for purposes of determining whether
a proposal has been approved.
EXPENSE OF MAILING
The expense of preparing and mailing of this Proxy Statement to
shareholders of the Company is being paid for by the Company. The Company is
also requesting brokers, custodians, nominees and fiduciaries to forward this
Proxy Statement to the beneficial owners of the shares of common stock of the
Company held of record by such persons. The Company will not reimburse such
persons for the cost of forwarding.
PROXIES
In voting their Common Stock, stockholders may vote in favor of or
against any proposal on the agenda or may abstain from voting. Stockholders
should specify their choice on the accompanying proxy card. All properly
executed proxy cards delivered pursuant to this solicitation and not revoked
will be voted at the Meeting in accordance with the directions given. If no
specific instructions are given with regard to the matter to be voted upon, then
the shares represented by a signed proxy card will be voted "FOR" the approval
of the proposals and in the discretion of such proxies to any other procedural
matters which may properly come before the Meeting or any adjournments thereof.
All proxies delivered pursuant to this solicitation are revocable at any time
before they are voted at the option of the persons executing them by (i) giving
written notice to the Secretary of the Company, (ii) by delivering a later dated
proxy card, or (iii) by voting in person at the Meeting. All written notices of
revocation and other communications with respect to revocations of proxies
should be addressed to Ernest Cheung, Secretary, Xin Net Corp., #950-789 W.
Pender St., Vancouver BC Canada V6C 1H2.
HOLDERS OF COMMON STOCK ARE REQUIRED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO THE COMPANY IN THE
ACCOMPANYING PRE-ADDRESSED ENVELOPE.
The person named as proxy is Angela Du, a director of the Company.
In addition to the solicitation of proxies by mail, the Company, through
its directors, officers, and employees, may solicit proxies from stockholders
personally or by telephone or other forms of communication. The Company will not
reimburse anyone for out-of-pocket costs and expenses incurred in the
solicitation of proxies. The Company also will request brokerage houses,
nominees, fiduciaries, and other custodians to forward soliciting materials to
beneficial owners, and the Company will not reimburse such persons for their
expenses incurred in doing so.
INTEREST OF PERSONS IN MATTERS TO BE ACTED UPON
No director or shareholder owning 10% or more of the outstanding shares
has indicated her or his intent to oppose any action to be taken at the meeting.
No current officer or director or shareholder has any interest in any matter to
be voted upon. Angela Du, Ernest Cheung, and Richco Investors, Inc., holders of
a total of 5,319 ,500 shares or 12.8% of the outstanding stock, have indicated
their intent to vote in favor of the proposals.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP
As of the call date of the meeting, September 29, 2003 the total number of
common shares outstanding and entitled to vote was 41,360,010.
The holders of such shares are entitled to one vote for each share held
on the record date. There is no cumulative voting on any matter on the agenda of
this meeting. No additional shares will be issued subsequent to call date and
prior to meeting.
RECORD DATE
Stock transfer records will remain open. _______________, 2003 shall be the
record date for determining shareholders entitled to vote and receive notice of
the meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of the date of the Proxy
Statement, with respect to the shares of common stock of the Company owned by
(i) owners of more than 5% of the outstanding shares of common stock, (ii) each
director of the Company, and (iii) all directors and officers of the Company as
a group. Unless otherwise indicated, all shares are held by the person named and
are subject to sole voting and investment are by such person.
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Interest Class
---- ---------------- ------------------- -----
Common Xiao-qing Du
#2754 Adanac St. 2,760,000 6.7%
Vancouver, BC V5K 2M9
Common Richco Investors, Inc. 2,559,500 6.2%
789 W. Pender St., #830
Vancouver, BC Canada V6C 1H2
Common Ernest Cheung (1) 2,559,500 6.2%
Secretary and Director
789 W. Pender St., #830
Vancouver, BC Canada V6C 1H2
Common Maurice Tsakok (1) 2,559,500 6.2%
789 W. Pender St., #830
Vancouver, BC Canada V6C 1H2
Officers and Directors as a Group 5,319,500 12.8%
Common Zeth Zhang
14/F Hutchison House 4,000,000 9.7%
10 Harcourt Road, Hong Kong
Common Grace Ding
14-143 Dahongmen Street 4,000,000 9.7%
Fengtai District, Beijing, China
Common Jerry Wang
17-2-101 New Zhongxili 4,000,000 9.7%
East District, Beijing, China
Common Susan Wen
502-16 No. 3 Street 4,000,000 9.7%
Zhongguancun, Haidian District
Beijing, China
Common Jason Quan
301-4-4 Railway Street 4,000,000 9.7%
West District, Beijing, China
(1) Through Richco Investors, Inc. of which Ernest Cheung and Maurice Tsakok are
officers, directors, and shareholders.
VOTING REQUIRED FOR APPROVAL
I. Thirty-three percent (33%) or more of the shares of common stock
outstanding at the record date must be represented at the Annual Meeting in
person or by proxy in order for a quorum to be present, but if a quorum should
not be present, the meeting may be adjourned without further notice to
shareholders, until a quorum is assembled. Each shareholder will be entitled to
cast one vote at the Annual Meeting for each share of common stock registered in
such shareholder's name at the record date.
II. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Each share of Common Stock entitles the holder thereof to one vote on all
matters to come before the Annual Meeting. Holders of shares of Common Stock are
not entitled to cumulative voting rights.
III. The favorable vote of a majority of the votes of the shares of
Common Stock present in person or represented by proxy if a quorum is present at
the Annual Meeting is necessary to:
- To elect five directors to hold office until the next annual
meeting of shareholders and qualification of their respective
successors.
- To ratify Clancy & Co. as the company auditors for year ended
December 31, 2003.
- To transact such other business as may properly come before the
Annual Meeting or any postponement of or adjournment thereof.
IV. The favorable vote of a majority of the class of common stock issued
and outstanding is necessary to approve the following actions:
- To authorize the sale of Xin Net Telecom Corp., the domain
name registration business of the Company to a non-affiliated
party ("Sino-i.com Limited") pursuant to an Agreement dated
February 26, 2003.
- To authorize an amendment to the Articles of Incorporation to
increase the authorized capital to 300 million common shares
$.001 par value.
- To approve the "Assets Transfer Agreement" signed on June 22,
2001, which transfers Company ISP assets to Beijing Sino Soft
Intel Information Technology Ltd.
REMUNERATION AND OTHER TRANSACTIONS WITH MANAGEMENT
EXECUTIVE COMPENSATION
(a) Officers' Compensation.
Compensation paid by the Company for all services provided up to December
31, 2002 to each of the executive officers and to all officers as a group.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Cash Compensation Security Grants
----------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Annual Restricted Securities Long Term LTIP All Other
Principal Compensation Stock Underlying Compensation/ Payments Other
Compensation /Other($) Awards Options/ Options
Position SARs(#)
(SHARES)
----------------------------------------------------------------------------------------------------------
Xiao-qing Du 2000 30,000 0 0 0 0 0 0 0
President 2001 32,084 0 0 0 0 0 0 0
2002 4,809 0 0 0 0 0 0 0
(CDN)
----------------------------------------------------------------------------------------------------------
Ernest Cheung 2000 0 0 24,000 0 0 0 0 0
Secretary 2001 0 0 24,000 0 0 0 0 0
2002 0 0 24,000 0 0 0 0 0
(CDN)
----------------------------------------------------------------------------------------------------------
Officers as 2000 30,000 0 24,000 0 0 0 0 0
A Group 2001 32,084 0 24,000 0 0 0 0 0
2002 4,809 0 24,000 0 0 0 0 0
(CDN) (CDN)
----------------------------------------------------------------------------------------------------------
(b) Directors' Compensation
Directors who are also officers of Xin Net Corp. receive no cash
compensation for services as a director. However, the directors will be
reimbursed for out-of-pocket expenses incurred in connection with attendance at
board and committee meetings. The Company has granted options to directors under
its Stock Incentive Plan subsequently adopted.
SUMMARY COMPENSATION TABLE OF DIRECTORS
(To December 31, 2002)
Cash Compensation Security Grants
----------------------------------------------------------------------------------------------------------
Name and Year Annual Meeting Consulting Number Securities LTIP All Other
Principal retainer Fees ($) Fees/Other of Underlying Payments Compensation
Position Fees ($) Fees($) Shares (#) Options/SARs(#)
(SHARES)
----------------------------------------------------------------------------------------------------------
Xiao-qing Du, 2000 0 0 0 0 0 0 0
Director 2001 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
Marc Hung 2000 0 0 29,500 0 0 0 0
Director 2001 0 0 60,000 0 0 0 0
(resigned) 2002 0 0 30,000 0 0 0 0
CDN
----------------------------------------------------------------------------------------------------------
Ernest Cheung, 2000 0 0 0 0 0 0 0
Director 2001 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------
Maurice Tsakok 2000 0 0 24,000 CDN 0 0 0 0
Director 2001 0 0 24,000 CDN 0 0 0 0
2002 0 0 24,000 CDN 0 0 0 0
----------------------------------------------------------------------------------------------------------
Directors as a 2000 0 0 53,500 CDN 0 0 0 0
group 2001 0 0 84,000 CDN 0 0 0 0
2002 0 0 54,000 CDN 0 0 0 0
-------------------------------------------------------------------------------------------------------------------------------
There have been no Option/SAR grants or exercises in the last fiscal
year reportable under Reg. S-B, 402(c) or (d).
(c) Termination of Employment and Change of Control Arrangements. None.
(d) Stock purchase options:
On February 26, 1999, stock options for a total of 480,000 shares at $.40
per share were granted to officers and employees (or persons who became
officers) that had contributed to the success of the company in the past: Marc
Hung (150,000 shares) and Xin Wei (330,000 shares) (Note: Mr. Wei is not an
officer of the Company, but an employee of Infornet Investment Corp., a subsid-
iary of Xin Net Corp.) All share options were exercised as of April 6, 1999.
On November 12, 1999 the Company granted 2,136,000 options to purchase
shares at $1.30 per share to entities/persons who contributed to the successful
results achieved by the Company in 1999, as follows:
a. 262,000 options to Gemsco Management Ltd. (owned beneficially by
director Maurice Tsakok) for designing and implementing the Company's corporate
website, advising on technological matters, researching the technology sector
and for services as a director.
b. 262,000 options to Farmind Link Corp. for their role as advisor on
strategic issues, technology market trends, and financial and capital market
issues.
c. 262,000 options to Sinhoy Management Ltd. (owned beneficially by officer
and director Marc Hung) for their contributions to the general management of the
Company, investor relations, technological matters and for services as a
director.
d. 212,000 options to Lancaster Pacific Investment, Ltd. for their
contributions in the areas of regulatory matters, Chinese market conditions and
strategies aimed at penetrating the market.
e. 50,000 options to Ernest Cheung for services rendered as secretary and
director of the Company.
f. 20,000 options to Yonderiche International Consultants Ltd. for services
rendered in matters regarding Chinese government policies and regulations.
g. 1,068,000 options to Weststar Holdings Limited (owned beneficially by
Xiao-qing Du, a director and president of Infornet Investment Corp., and Xin
Wei, a director and secretary of Infornet Investment Corp. and president of XIN
HAI) and employees of Xin Hai Technology Development Ltd., as a group, for the
successful continued development of the business in China and achieving
excellent operational results during the year. The breakdown of the 1,068,000
options is to be determined at a later date.
The average closing price for the five trading days ended on November 12,
1999 was $1.28 per share. The closing price on November 12, 1999 was $1.187 per
share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 26, 1999, Marc Hung, who was neither an officer nor director
but since has become President and Director, was granted and exercised (in
March, 1999) an option to purchase 150,000 shares of common stock at $.40 per
share. The option to purchase shares was granted to him for services rendered
since July 1998 as advisor to the Company in matters relating to management,
technology and strategies.
On February 26, 1999, Kun Wei, a shareholder, was granted and exercised (in
March) an option to purchase 330,000 shares of common stock at $.40 per share.
The option to purchase shares was granted to him for contributing to the success
of the joint venture, in particular with regards to technology development and
implementation. Kun Wei is Vice President of Xin Hai Technology Development,
Ltd. and the brother of Xin Wei.
On February 26, 1999, Xin Wei, a shareholder, who is President of Xin Hai
Technology Development, Ltd., the Company's joint venture Partner, was granted
and exercised (in March 1999) an option to purchase 330,000 shares of common at
$.40 per share. The option to purchase shares was granted to him for
contributing to the success of the joint venture, in particular with regards to
general management of Xin Hai Technology Development Ltd., business development
and governmental relations.
In May 1999, Marc Hung, President and Director of the Company, purchased
80,000 units of the private placement at the $1.00 offering price. Richco
Investors, Inc., a public company of which both Messrs. Ernest Cheung and
Maurice Tsakok are directors, officers and shareholders, purchased 700,000 units
in the private placement at $1.00 per unit in May 1999.
On September 17, 1999 385,000 units were issued to Richco Investors, Inc.
as a consulting fee for services rendered in structuring the unit placement.
The units consisted of one share and a warrant ("A" Warrant) to purchase an
additional unit at $2.00 per unit, such additional unit consisting of one share
and a warrant ("B" Warrant) to purchase an additional share at $5.00 per share.
On March 15, 2001 the Company amended both the Series "A" and Series "B"
warrants as follows:
- The exercise price of the Series "A" warrants is adjusted to $1.00 each and
their term is extended to the earlier of (a) March 31, 2003 and (b) the 90th day
after the day on which the weighted average trading price of Xin Net Corp.'s
shares exceeds $1.25 per share for ten consecutive days;
- Upon exercise of one Series "A" warrant at $1.00, the holder will receive
one Xin Net Corp. common share and one Series "B" warrant;
- The exercise price of the Series "B" warrants is adjusted to $1.50 each and
their term is extended to the earlier of (a) March 31, 2004 and (b) one year
after the 90th day occurrence described above.
On November 12, 1999 the Company granted 2,136,000 options to purchase
shares at $1.30 per share to entities/persons who contributed to the successful
results achieved by the Company in 1999, as described above under "Stock
Purchase Options."
The Company has made loans to the joint venture since the year 1999. These
loans bear 0% interest and are payable on demand. At December 31, 2002 the
cumulative amount of the loans was $3,152,184.
On June 22, 2001 the Company, through its Chinese joint venture partner Xin
Hai Technology Development Ltd, signed an agreement to transfer ISP assets to
Beijing Sino Soft Intel Information Technology Ltd. for USD 700,000 equivalent
in Renminbi, plus other considerations. The text of the agreement is appended to
this proxy as Exhibit B. Xin Hai was an affiliate at the time of the contract.
On February 26, 2003 the Company signed an agreement to sell 100% ownership
of Xin Net Telecom Corp., its domain name Registration business to Sino-i.com
Limited. A formal agreement has been executed subject to shareholder approval.
The translated text of the Agreement as provided by translators in China is
appended to this Proxy as Exhibit C. Sino-i.com is not an affiliate or related.
Committees and Meetings
The Board held numerous meetings during the fiscal year ended December
31, 2002. The Board has standing Audit and Compensation Committees. The Audit
Committee conducted its business during the regular meetings of the Board of
Directors during the last fiscal year and in addition, conferred from time to
time as necessary. The Compensation Committee, in addition to meetings as part
of the regular meetings of the Board, also conferred from time to time as
necessary. The Board has no standing nominating committee. All directors
attended more than 75% of the Board meetings and the meetings of the Board
committees on which such directors served.
The Audit Committee of the Board presently consists of Mr. Cheung and
Ms. Du. The Audit Committee has the responsibility to review the scope of the
annual audit, recommend to the Board the appointment of the independent
auditors, and meet with the independent auditors for review and analysis of the
Company's systems, the adequacy of controls and the sufficiency of financial
reporting and accounting compliance.
Mr. Cheung and Ms. Du currently serve on the Compensation Committee.
The Compensation Committee will administer the Company's Employee Stock Award
Plan (the "Plan") and determines the compensation to be paid to each of the
Company's executive officers, employees, and Directors.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Securities and Exchange Commission requires disclosure where an
executive officer of a company served or serves as a director or on the
compensation committee of an entity other than the Company and an executive
officer of such other entity served or serves as a director or on the
compensation committee of the Company. The Company does not have any such
interlocks. Decisions as to executive compensation are made by the Compensation
Committee. Mr. Cheung and Ms. Du are members of the Compensation Committee.
Indemnification of Directors and Officers
As permitted by the Florida Business Corporation Act, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach or alleged breach of
their duty of care. In addition, as permitted by the Florida Business
Corporation Act, the Bylaws of the Company provide generally that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Florida law, including those circumstances in which indemnification would
otherwise be discretionary.
The Company has entered into indemnification agreements with each of
its directors and executive officers that provide the maximum indemnity allowed
to directors and executive officers by the Florida Business Corporation Act and
the Bylaws, as well as certain additional procedural protections. In addition,
the indemnification agreements provide generally that the Company will advance
expenses incurred by directors and executive officers in any action or
proceeding as to which they may be indemnified.
The indemnification provision in the Bylaws, and the indemnification
agreements entered into between the Company and its directors and executive
officers, may be sufficiently broad to permit indemnification of the officers
and directors for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act").
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
ANNUAL REPORT AND INTERIM 2ND QUARTER 2003 REPORT
The Company's Annual Report on Form 10-KSB for the year ended December
31, 2002 (the "Form 10-KSB") and Interim Report 2nd Quarter 2003 are being
furnished simultaneously herewith. The Form 10-KSB and 2nd Quarter Interim
Report are not considered a part of this Proxy Statement.
The Company will also furnish to any stockholder of the Company a copy
of any exhibit to the Form 10-KSB as listed thereon, upon request and upon
payment of the Company's reasonable expenses of furnishing such exhibit.
Requests should be directed to Ernest Cheung, Secretary, at #950, 789 W. Pender
St., Vancouver, BC Canada V6C 1H2.
BOARD OF DIRECTORS AND OFFICERS
Three of the persons listed below, namely Ernest Cheung, Xiao-Qing
(Angela) Du and Maurice Tsakok are Officers and the members of the Board of
Directors as of this date. The persons, whose name are annotated with an
asterisk (*) are not directors or officers of the Company, but are nominees for
election to the Board. All persons are nominees for Directors for the following
term.
DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------
Period of
Service As
An Officer Or
Name Age Position(s) Director
---------------------- -------- ------------------------ -------------------
Ernest Cheung 53 Secretary & Director Annual
Xiao-qing (Angela) Du 32 President & Director Annual
Maurice Tsakok 51 Director Annual
The principal occupations of each director and officer of the Company
for at least the past five years are as follows:
MANAGEMENT EXPERIENCE
XIAO-QING (ANGELA) DU, President of subsidiary Infornet Investment Corp. and
Director, age 32, was President and Director of our company from 1996 to April
1999. She received a Bachelor of Science in International Finance in 1992 from
East China Normal University. She received a Master of Science in Finance and
Management Science in 1996 from the University of Saskatchewan Canada. She has
been Business Manager of China Machinery & Equipment I/E Corp. (CMEC) from 1992
to 1994. She is now President of Infornet Investment CORP., our wholly owned
subsidiary in Canada, and remains a director of our Company.
ERNEST CHEUNG, Secretary and Director, age 53, has been Secretary of our
company since May 1998. He received a B.A. in Math in 1973 from University of
Waterloo Ontario. He received an MBA in Finance and Marketing from Queen's
University, Ontario in 1975. From 1991 to 1993 he was Vice President of Midland
Walwyn Capital, Inc. of Toronto, Canada, now known as Merrill Lynch Canada. From
1992 until 1995 he served as Vice President and Director of Tele Pacific
International Communications Corp. He has also served as President for Richco
Investors, Inc. since 1995. He has been a director of our Company since 1996. He
is currently a Director of Agro International Holdings, Inc. since 1997, Richco
Investors, Inc. since 1995.
MAURICE TSAKOK, Director (since 1997), age 51, was employed from 1994 to
1996 by Sagit Mutual Funds, a mutual fund company, who as a vice-president was
responsible for computer operations and research on global technology companies.
From 1997 to present, he acted as a consultant on the high-tech industry and
provides technical analysis on high-tech companies. He holds a Mechanical
Engineering degree (1974 University of Minnesota) as well as an MBA specializing
in Management Information Systems (MIS) (1976 Hofstra University). In 2000, he
became a Director of China NetTV Holdings, Inc.
The directors of the Company hold office until the next annual meeting
of the shareholders and until their successors have been duly elected and
qualified.
The officers of the Company are elected at the annual meeting of the
Board of Directors and hold office until their successors are chosen and
qualified or until their death, resignation, or removal.
Proposal #1
NOMINATION AND ELECTION OF DIRECTORS
The Company's Bylaws currently provide for the number of directors of
the Company to be established by resolution of the Board of Directors and that
number is four and will become five. The Board has nominated five persons. At
this Annual Meeting, a Board of five directors will be elected. Except as set
forth below, unless otherwise instructed, the proxy holders will vote the
proxies received by them for Management's nominees named below. In the event
that any Management nominee shall become unavailable, or if other persons are
nominated, the proxy holders will vote in their discretion for a substitute
nominee. It is not expected that any nominee will be unavailable. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until a successor has been elected and qualified.
The proxies solicited hereby cannot be voted for a number of persons
greater than the number of nominees named below. The Certificate of
Incorporation of the Company does not permit cumulative voting. A plurality of
the votes of the holders of the outstanding shares of Common Stock represented
at a meeting at which a quorum is presented may elect directors.
THE DIRECTORS NOMINATED BY MANAGEMENT ARE:
Ernest Cheung
Xiao-qing (Angela) Du
Maurice Tsakok
Stephen Hutchison
Kun Wei
The biographical information for Messrs. Tsakok and Cheung and Mdm. Du are con-
tained in the previous section "management Experience" for current management.
Stephen Hutchison - Mr. Hutchison has been an educator for the past twenty-eight
(28) years. His experience has given him the opportunity to teach and work with
children at all ages (Kindergarten through Grade twelve). Mr. Hutchison received
his Bachelor of Arts degree in 1973 and gained his Bachelor of Education one
year later. After gaining experience in the classroom for 5 years he returned to
school to complete a Master of Education degree with emphasis in the areas of
Educational Psychology and Curriculum Design. Since 1986, Mr. Hutchison has
maintained the role of School Administrator in three of the most prominent
schools in Canada - Appleby College in Ontario, St. John's-Ravenscourt School,
Winnipeg, Manitoba, and St. George's School, Vancouver, British Columbia. Most
recently, he has taken over the role of Headmaster of St. John's School in
Vancouver. In his role as administrator, he has undertaken curriculum review
processes at each of his schools, professional development improvements, and he
has successfully undertaken financial activities that have enabled each of his
schools to prosper financially. An excellent administrator, communicates
effectively and is decisive in dealing with issues pertaining to the success of
the school. Mr. Hutchison is comfortable in his relations with Boards, parents,
teachers, and students. Although it is easy for a Head of school to appease
constituents, Mr. Hutchison is comfortable making tough decisions that will
benefit the school over a period of time. Mr. Hutchison has extensive experience
preparing annual budgets, reporting to various Boards, and effectively solving
problems at all levels of the school system. More recently, Stephen Hutchison
has found his ten years experience traveling to Asia enabled him to be invited
to give lectures in Taipei, Kaohsiung, and Hong Kong to teachers, parent groups,
and school administrators on Western Education and Effective Leadership. Mr.
Hutchison's experience, success, and commitment to education have made him a
respected member of the Education communities both within Canada and Asia.
KUN WEI - Kun Wei has been with the Company's operations in China for the past 5
years. He received a computer science degree from the Computer College of the
Beijing Polytechnic University in 1996. He is a founder operator of Beijing Xin
Hai Technology Development Corp. and was in charge of the technical aspects of
the operations. This experience have given him extensive knowledge in the
successful operations of a China based company and his input to the Board was
invaluable over the last 5 years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" MANAGEMENT'S NOMINEES.
Proposal #2
To authorize the sale of the Company's Domain Name Registration business
"China DNS" to Sino-i.com pursuant to an agreement dated February 26, 2003.
In February 26, 2003, the Company signed an agreement to sell the
Company's subsidiary Xin Net Telecom Corp. (Domain name registration) to a
subsidiary of Sino-i.com Limited, a Stock Exchange of Hong Kong listed company
for a total consideration of Rmb 20 million (approx. US$ 2.4 million). Infornet
Investment Limited is the Company's wholly owned Hong Kong subsidiary that
controls the Company's interest in Xin Net Telecom Corp. This transaction is
now submitted for shareholder approval at the Annual Meeting. This transaction,
will take the Company out of the China Internet business.
Since the Company started its Internet business in China, it has seen
rapid growth in Internet use in China; but it has also seen an equal if not
greater growth in companies entering this arena. As a result, the industry
experienced severely reduced operating margins. The Company had managed to
continue to compete by cutting discretionary cost such as advertising and
improving overall operating efficiencies. Although the Company is considered a
leader in the Domain Name Registration field, due to the lack of adequate
funding, future growth potential is limited at best. The Company had struggled
for the past several years to break even and was hoping for some meaningful
funding to grow, but the plan was nullified when the funding failed to
materialize. As China becomes more and more open according to the terms of the
WTO, the world's large well-funded companies have been given access to the China
market and have seriously compromised the Company's competitive position. Due to
the continued loss on operations ($254,035 in 2002). In 2003, the Company
entered into an Agreement to sell the domain name registration business to a
subsidiary of Sino-i.com Limited for approximately $2.4 million. We are treating
the DNS business as discontinued operations at this time, and Sino-i.com Limited
is managing and funding the operations.
A pro forma financial statement of Xin Net Corp. after sale of Xin Net
Telecom Corp. is shown as Exhibit D(1-4).
Summary of Agreement
--------------------
The Company has executed a formal agreement on Feb. 26, 2003 to sell
100% of Xin Net Telecom Corp., the domain name registration business. The
closing of the sale agreement is however conditional to shareholders approving
the transaction. If shareholders do not approve of the transaction, the sale
agreement, as executed, cannot be closed, and may have to be voided or modified.
The agreement is included as Exhibit C. The pro forma financial statement of Xin
Net Corp., if the sale of the domain name registration business is not completed
but the ISP business is sold (Exhibit D(2)) is included as an Exhibit.
Terms of the Transaction
------------------------
There is no tender offer involved in the proposed transaction. The
proposed transaction is not dependent upon the approval of Proposal #3.
I. The company proposes to sell its domain name registration
business, if the transaction is approved by shareholders. The
business which will be transferred by the company to the Buyer,
is its domain name registration and business in China. The pro
forma financial statements after sell domain name and the web
design & hosting segment of business is contained on Exhibit
D(3).
II. Consideration is being offered to Xin Net Corp. in the form of a
cash at closing. No distribution or dividend to shareholders will
be made.
III. Xin Net Corp is engaging in the transaction for several reasons,
mainly:
A. The domain name registration business of the company has
grown as the Internet business has grown in China has the
chance to continue to grow only with expenditure of
substantial amounts of capital.
B. The operations of the domain name registration, but in a
very competitive environment, has the potential of operating
at a profit only with large additional capital infusions.
IV. The vote required to approve the transaction is the affirmative
vote of the holders of a majority of the shares represented and
voting at the Annual Meeting at which a quorum must be present.
V. No material differences in rights of security holders will result
from the proposed sale transaction.
VI. The transaction will be treated as a sale of assets and extra-
ordinary income.
VII. The tax treatment of the sale would be as a capital gain from
sale of assets held for more than one year.
VIII. No securities are being purchased from any officer, director, or
affiliate of the company.
IX. No security holders are being treated differently in any way.
X. Dissenting shareholders may be entitled to any appraisal rights
for the transaction under Florida law. If a shareholder wishes to
exercise appraisal rights, they must follow the procedures set
forth in FSA 607.1304-1333 inclusive, including transmitting the
Notice of Demand for appraisal on or before __________________.
FSA 607-1301 to 1333 inclusive are attached hereto as Exhibit E.
The Appraisal Demand Form is Exhibit F.
XI. There are no provisions for unaffiliated shareholders to grant
them access to corporate files or obtain counsel or appraisal
services at the expense of the company.
XII. The transaction has no effect on the trading or listing eligibil-
ity of the company's securities at this time.
Required Approval
For action to be taken at the Annual Meeting on this issue, a quorum
must be present. To be considered approved, the proposal to allow the sale of
Xin Net Telecom Corp. to Sino-i.com Limited must receive the affirmative vote of
the holders of a majority of the shares of common stock issued and outstanding.
Unless marked to the contrary, proxies received will be voted "FOR" the approval
of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL #2 TO ALLOW SALE OF
THE CHINA DNS BUSINESS TO SINO-I.COM LIMITED.
Proposal #3
On May 18, 2001 the Board of Directors decided that the Company's
business in China will focus on domain name registration and web-hosting
services, and will discontinue Internet access provision (ISP) services as soon
as practicable. The ISP business in China faced stiff competition, mainly from
government-owned telephone companies, and accounted for a very large share of
Company operating losses in the fiscal year ended December 31, 2000 and in the
fiscal quarters ended March 31, 2001 and June 30, 2001. The Company filed a Form
8-K "Current Report" with the Securities and Exchange Commission (SEC) regarding
this decision on May 23, 2001. On June 22, 2001 the Board of Directors
authorized the Company's joint venture partner, Xin Hai Technology Development
Ltd., to sign an agreement to sell Company ISP assets to Beijing Sino Soft for
USD 700,000 in cash. The agreement was signed on June 22, 2001. An English
summary and an English translation of the agreement were filed with the SEC on
July 12, 2001. The summary is reproduced here and the agreement is included as
Exhibit B of the Proxy Statement. A pro forma financial statement to June 30,
2001 after disposal of ISP assets is also included as Exhibit D(2). The statutes
of the State of Florida, the jurisdiction of incorporation of the Company,
require that the agreement be approved by Company shareholders.
Summary of Asset Transfer Agreement dated June 22, 2001.
The Company has entered into an Assets Transfer Agreement under which it has
agreed to transfer all the assets of the ISP operations in China to Beijing Sino
Soft Intel Information Technology, Ltd. of Beijing. The transfer includes all
transferable permits, equipment, agency contracts, customers, accounts,
employees and operations.
The price for the transfer of assets by the Company is $700,000 (USD)
payable to the Company in Renminbi at the official exchange rate. A sum of
$500,000 has been received to date and the balance of $200,000 is to be received
after Xin Net Corp. shareholders' approval of the Agreement.
The Company has agreed to assign Logo, lines, numbers, locations and
all accounts and assets and has agreed not to compete in China in the ISP
business. No fixed debt is assumed by purchaser, but ongoing contracts for
Internet access provision, etc. will be assumed by buyer.
Terms of the Transaction
There is no tender offer involved in the proposed transactions. The
proposed transaction is not interdependent upon any other transaction.
I. Sale of Xin Net Corp's Internet Service Provider Assets in China
to Sino Soft, a Chinese Internet Service Provider.
The assets consist of the ISP telephone numbers, subscribers,
equipment, domains, personnel as may be rehired by Sino Soft,
hosting agreements, licenses, software, and goodwill. The
purchase price is $700,000, $500,000 of which has been paid, and
$200,000 of which shall be paid upon shareholder approval of the
transaction.
II. No consideration is being offered to security holders of Xin Net
Corp.
III. Xin Net Corp. is engaging in the transactions for several
reasons:
A. The ISP operations have lost money on operations since
inception.
B. The domain name registration service is in a very
competitive environment, and substantial additional capital
will be required for advertising and marketing. The sale
will provide capital for the Company to continue in its
remaining business.
C. Substantial additional capital which is unavailable to the
company would be necessary to continue operations, with no
assurance of reaching profitability.
D. The sale allows the company to recoup $700,000 of its
investment.
E. The paying subscriber base for profitability for ISPs has
proven extremely costly to obtain and retain in China.
F. Without substantial additional capital expenditure, the
Domain name registration business will in all likelihood
decline in value.
IV. The vote required by Xin Net corp. shareholders to approve the
transaction is the affirmative vote of the holders of a majority
of the shares represented and voting at the Annual Meeting at
which a quorum must be present.
V. No material differences in rights of security holders will result
from the proposed sale transaction.
VI. The transaction will be treated as a disposal of assets of
discontinued operations and may result in an extraordinary gain.
VII. There will be no Federal income tax consequences of the
transaction due to the overall operational net loss of the
company.
VIII. No securities are being purchased from any officer, director, or
affiliate of the company.
IX. No security holders are being treated differently in any way.
X. Dissenting shareholders may be entitled to any appraisal rights
for the transaction under Florida law. If a shareholder wishes to
exercise appraisal rights, they must follow the procedures set
forth in FSA 607.1304-1333 inclusive, including transmitting the
Notice of Demand for appraisal on or before __________________.
FSA 607-1301 to 1333 inclusive are attached hereto as Exhibit E.
The Appraisal Demand Form is Exhibit F.
XI. There are no provisions for unaffiliated shareholders to grant
them access to corporate files or obtain counsel or appraisal
services at the expense of the company.
XII. The transaction has no effect on the trading or listing eligibil-
ity of the company's securities at this time.
Required Approval
For action to be taken at the Annual Meeting on this issue, a quorum
must be present. To be considered approved, the agreement to sell Company ISP
assets to Beijing Sino Soft and to sell the domain name registration business
must receive the affirmative vote of the holders of a majority of the shares of
common stock issued and outstanding. Unless marked to the contrary, proxies
received will be voted "FOR" approval of the agreement to sell the Company's ISP
assets to Beijing Sino Soft.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AGREEMENT SIGNED ON JUNE 22, 2001 TO SELL THE COMPANY'S ISP ASSETS TO BEIJING
SINO SOFT.
Proposal #4
AMENDMENT TO ARTICLES FOR
AN INCREASE IN AUTHORIZED CAPITAL
The Company, through its Board, is asking shareholders to approve the
Amendment of the Articles of Incorporation to increase the authorized capital to
300 million common shares at $.001 par value and 300 million at $.001 par value
preferred shares at $.001 par value, in such classes or series and with such
rights and privileges as the Board may hereafter determine. The Company current-
ly has 50 million common shares authorized at $.001 par value.
Management believes these changes to the Articles of Incorporation to
provide additional capital shares are in the best interest of the corporation,
because the current structure of our shares is not appropriate in current market
conditions for a small public corporation, to make an acquisition, or otherwise
raise significant capital. Further, the Company has issued and outstanding
41,360,010 shares out of 50,000,000 authorized, and such amount is not
sufficient in management's judgment to provide unallocated shares for acquisi-
tions or capital raising at current market prices and condition.
Shareholders should be advised that the Board of Directors may make
decisions about private placement and asset acquisitions for new shares of
common stock, upon which shareholders generally will not have the right to vote,
or the same proportionate rights to vote as previously before these proposed
changes. In the event of a "forced Merger," under the Florida General Corpora-
tions Laws, or a share exchange with shareholders of another corporation, if the
Directors and principal shareholders have no interest in the transaction before
the transaction, and the transaction is voluntary and approved by the Board of
Directors, shareholders have no rights to vote. Other transactions, not meeting
those requirements may involve normal requirements for shareholder approval,
but, if adopted, the approval of a majority of shareholders will be sufficient,
to approve transactions.
Approving additional authorized capital will not make the Company better
able to meet exchange listing criteria. At the current date, with the proposed
change the Company would not meet exchange listing criteria. Exchange listing
requirements change constantly. There is no assurance the proposed changes will
meet exchange listing requirements when, and if, the Company is otherwise
qualified. There is no assurance the Company will qualify for exchange listing.
There is no assurance of any effect of the price of the Company's stock
will result, or that the market price for the Company's common stock,
immediately or shortly after the proposed changes, if approved, will rise, or
that any rise which may occur will be sustained. Market conditions, investor
attitudes, and external conditions may affect the stock price. The Company is
proposing these steps that will best calculate to meet the market attractively.
The Company cannot control the market's reaction.
Dissenting shareholders have no appraisal rights under Florida law or
pursuant to the constituent documents of incorporation or bylaws in connection
with the proposed additional capitalization.
Required Approval
For action to be taken at the Annual Meeting on this issue, a quorum
must be present. To be considered approved, the agreement to sell Company ISP
assets to Beijing Sino Soft and to sell the domain name registration business
must receive the affirmative vote of the holders of a majority of the shares of
common stock issued and outstanding. Unless marked to the contrary, proxies
received will be voted "FOR" approval of the agreement to sell the Company's ISP
assets to Beijing Sino Soft.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE ARTICLES TO
INCREASE THE AUTHORIZED SHARES, AND UNLESS MARKED TO THE CONTRARY, PROXIES
RECEIVED WILL BE VOTED FOR THE PROPOSED INCREASE IN AUTHORIZED CAPITAL.
Proposal #5
INDEPENDENT PUBLIC ACCOUNTANTS
Clancy and Co., PLLC, Independent Public Accountants, of Phoenix,
Arizona, have been engaged as the Certifying accountants for the period through
fiscal year 2002 and shareholders are asked to ratify such engagement.
Ratification of the appointment of Clancy and Co, PLLC, as the Company's
independent public accountants for the fiscal year ending December 31, 2003 will
require the affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting. In
the event the stockholders do not ratify the appointment of Clancy and Co.,
PLLC, for the fiscal year 2003, such appointment will be reconsidered by the
Board.
Required Approval
For action to be taken at the Annual Meeting on this issue, a quorum
must be present. To be considered approved, the agreement to sell Company ISP
assets to Beijing Sino Soft and to sell the domain name registration business
must receive the affirmative vote of the holders of a majority of the shares of
common stock issued and outstanding. Unless marked to the contrary, proxies
received will be voted "FOR" approval of the agreement to sell the Company's ISP
assets to Beijing Sino Soft.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF AUDITORS,
CLANCY & CO., PLLC.
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matter appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission. Should a shareholder intend to present a proposal at next year's
annual meeting, it must be received by the secretary of the Company at #950-789
W. Pender St., Vancouver, BC Canada V6C 1H2, not later than 60 days after fiscal
year end, in order to be included in the Company's proxy statement and form of
proxy relating to that meeting. It is anticipated that the next annual meeting
will be held in July, 2004.
Other Matters. Management knows of no business that will be presented
for consideration at the Annual Meeting other than as stated in the Notice of
Annual Meeting. If, however, other matters are properly brought before the
Annual Meeting, it is the intention of the persons named in the accompanying
form of proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
Dated: October 15, 2003
By Order of the Board of Directors
/s/ Angela Du
By: ----------------------------------
Angela Du, President
EXHIBIT B
ISP ASSETS TRANSFER AGREEMENT
This Assets Transfer Agreement (hereafter "Agreement") made by both parties on
June 22, 2001 in Beijing.
THE PARTIES:
Party A (Transferor): Beijing Xin Hai Technology Development Ltd.
Registered Address: Room 1858, New Century Office Tower, No.6
Southern Road, Capital Gymnasium, Beijing
Legal Representative: Mingming Lu
Party B (Transferee): Beijing Sino Soft Intel Information
Technology Ltd.
Registered Address: 2nd floor, No. 9 A, East Tucheng Rd,
Heping Street, Chaoyang District, Beijing.
Legal Representative: Xia Gao
Recital:
1. Party A possesses certain ISP assets including equipment and related
operating equipment that is capable of providing ISP services to the
general public prior to the effective date of this Agreement. Party A
wishes to transfer the above mentioned assets, related permits,
software, contracts, and subscribers to Party B according to the terms
of this Agreement.
2. Party B wishes to accept the above mentioned operating assets and
intangible assets including related permits, software, contracts, and
subscribers.
3. Party A agrees not to re-enter the Internet access business (i.e. ISP
services) in the future.
Through friendly negotiation, the parties come to the following agreement:
ARTICLE 1 DEFINITION
Other than specifically specified, the following terms shall have the same
meaning throughout the Agreement including all supplements and addendum:
Transfer Assets: referring to all of the Transferor's equipment and
related operating equipment that is capable of providing ISP
services to the general public prior to the effective date
of this Agreement, including related permits, software,
contracts, and subscribers.
Transfer Equipment: referring to all the fixed equipment listed in Supplement 1
of the Agreement.
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Subscribers: referring to all the Transferor's ISP customers until the
effective day of the Agreement.
Technical Information:
referring to basic technical information related to the
Transfer Equipment listed in Supplement 1, and documentation
that ensures the proper operation of the Transfer Equipment
such as usage and maintenance specifications, the ISP
related operations and financial data, and subscriber
information.
Related Services: referring to the related permits and rights that accompany
the transfer as listed in Supplement 2 of this Agreement.
Employees: referring to the Transferor's employees with formal
employment contract that are associated with the Transfer
Assets as listed is in Supplement 3 of the Agreement.
ARTICLE 2 TRANSFER ASSETS
2.1 In accordance with the provisions of this Agreement, the Transferor
agrees to transfer the above-mentioned assets to the Transferee, and
the Transferee agrees to accept such assets from the Transferor.
2.2 The Parties agree that the price of Transfer Assets to be US$700,000.
The Transferor agrees to accept payment in Renminbi with the official
exchange rate of the day as the basis of conversion.
2.3 The Transferor will provide assistance to the Transferee throughout
the transfer process.
2.4 This Agreement is subject to the approval of Xin Net shareholders at
the next General Meeting.
ARTICLE 3 TRANSFER PROCEDURE
3.1 The Transferee will assume operations of the Transfer Equipment at the
effective date of this Agreement; transfer of technical and other
intangibles should commence so as the Transferee can assume full
operations.
3.2 The Transferee will within 5 days examine and verify that the Transfer
Equipment corresponds to Supplement 1 of this Agreement. After which
an acceptance memorandum will be executed by both parties.
3.3 The Transferor will perform the process of transferring the Related
Services as listed in Supplement 2 immediately after the effective
date of the Agreement.
3.4 Unless with written notice from the Transferee, the Transferor is
responsible for all expenses (including but not limit to equipment
maintenance, insurance, and other operating expenses) prior to the
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transfer of the Transfer Equipment and Technical Information to the
Transferee.
3.5 The Transferee agrees to pay a guarantee deposit of US$ 350,000 to the
Transferor on the day of signing of this Agreement. The US$ 350,000
balance will be paid after approval is obtained from Xin Net
shareholders at the next General Meeting.
3.6 After the Transferee makes a payment, the Transferor will transfer
proportional ownership of the Transfer Assets to the Transferee. It is
after the Transferee has made all the payments that it will have total
ownership of the Transfer Assets.
ARTICLE 4 EMPLOYEES
4.1 To facilitate a smooth transfer, the parties agree that the Transferee
will continue to retain all the Transferor's employees related to the
ISP business, relieving the Transferor from all related employment
contracts.
4.2 The Transferor will provide detail information of each employee
including but not limited to their employment contract, job
description and responsibility, wages, bonus, benefit, insurance,
incentive method and other related information.
4.3 The Transferor will be responsible for the cancellation of the
existing employment contracts and try its best to entice the employee
to accept a new contract with the Transferee. The Transferor is
responsible for all employment costs prior to the effective date of
the Agreement.
4.4 The Transferee will offer six-month employment contract without
probation to employees that would like to continue with the Transferee
with the same wages and benefits. The Transferee also guarantees that
employees will not be let go without cause for six months.
ARTICLE 5 TERMINATION
5.1 After the effect date of this Agreement, if either party breaches its
responsibility, declaration or guarantee as defined in the Agreement
or has made a false or misleading declaration, then the other party
has the right to unilaterally terminate the Agreement without
liability.
5.2 When either party unilaterally terminates the Agreement according to
the above article, it should give a written notice to the other party
and the Agreement is considered to be terminated as soon as the notice
is given.
ARTICLE 6 WARRANTIES
6.1 The Transferor hereby makes the following warranties to the
Transferee:
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A. General items:
A1. The Transferor is a legal limited corporation set up based
on the Chinese Laws and has the right and ability to execute
and implement this Agreement.
A2. The Transferor has obtained all the permission and
authorization for executing and implementing this Agreement
unless indicated otherwise in this Agreement.
B. Ownership of Transfer Assets
B1. The Transferor has legal ownership and utilization rights
for all the Transfer Assets.
B2. There is no lien, mortgage, leasehold, and permission or
other burden or third party right or other restriction that
affects the Transfer Assets as defined in this Agreement.
B3. When the Transferor transfers the ownership of the Transfer
Assets to the Transferee according to the terms of this
Agreement, the Transferee will have the proportional
ownership and full utilization right for the Transfer
Assets. Execution of the ownership and utilization rights
will not conflict with any laws, regulations, or any third
party rights. From the effective date of this Agreement up
to the day the Transferee completes all the payments and
obtains full ownership of the Transfer Assets, all revenues
and expenses related to the operations of the Transfer
Assets accrue to the Transferee. At the same time the
Transferee will take proportional ownership of the Transfer
Assets. Unless with permission of the Transferor, the
Transferee cannot engage in any dealings with the portion of
the Transfer Assets in any manner that the Transferee does
not own. B4. After the effective date of this Agreement, all
revenues generated by Transfer Assets accrue to the
Transferee. If any revenue gets into the Transferor`s
account due to delays caused by transferring agency
contracts, the Transferor will credit the revenues to the
Transferee on a timely basis.
D. Technical Information
The Transferor has not granted any rights of the Technical Information,
confidential information or other utilization right to a third party. It
has no infringed on any third party right or other intellectual property by
using Technical Information. Therefore, the Transferee will not infringe
any third party right or other intellectual property by using the Technical
Information from the Transferor.
E. Lawsuit
The Transferor is not a party to any lawsuit or arbitration related to the
Transfer Assets. It also does not foresee any lawsuit or arbitration
related with the Transfer Assets.
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F. Tax
F1. Before the effective date of the Agreement, the Transferor
is responsible for all taxes that it should or may bear to
the different governing bodies.
F2. After the Transferee has obtained ownership and operation
rights of the Transfer Assets, it does not have to bear any
taxes related with Transfer Assets before the effective date
as mentioned above.
6.2 The Transferee hereby makes the following warranties to the
Transferor: The Transferee is a legal limited corporation set up based
on the Chinese Laws and has the right and ability to execute and
implement this Agreement. The Transferee has obtained all the
permission and authorization for executing and implementing this
Agreement unless indicated otherwise in this Agreement.
ARTICLE 7 COVENANT
7.1 The Transferor hereby makes the following covenants to the Transferee:
(1) The Transferor agrees to keep the Transfer Assets in good
working order prior to transferring to the Transferee. The
Transferor will maintain the assets and ensure the Transfer
Assets are in good working condition (as listed in
Supplement 1, except normal wear and tear);
(2) The Transferor guarantees that the Transferee owns the sole
user rights to the Transfer Assets from the transfer day
according to this Agreement. This however, does not affect
the Transferee's right on future claims by the Transferee
under terms of this Agreement. If disputes occur with any
third party concerning the user rights of the Transfer
Assets, it is the Transferor's responsibility to resolve the
dispute and bear all the compensation, expenses and other
responsibilities related to the dispute. If the Transferee
suffers any loss due to such third party dispute, the
Transferor is liable to compensate the Transferee for such
loss.
(3) The Transferor guarantees to finish transferring Part 1 of
Supplement 2 in a timely manner and use its best efforts to
assist the Transferee to complete Part 2 of Supplement 2.
(4) The Transferor guarantees that during interim transferring
period all the transferring procedures are legal.
7.2 The Transferee hereby makes the following covenants to the Transferor:
(1) The Transferee promises to make all the payments to the
Transferor within the stated time according to the terms of
this Agreement.
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(2) After the effective date of the Agreement, the Transferee
will continue to provide services unconditionally according
to the existing agreements between the Transferor and its
subscribers.
ARTICLE 8 BREACH OF AGREEMENT
8.1 Any of the following constitutes breach by either party:
(1) Being in breach of any of the responsibilities in this
Agreement;
(2) Being in breach of any of the warranties and covenants in
this Agreement;
(3) Any false declarations, warranties and covenants;
(4) The operating data from January to March provided by the
Transferor is severely misstated.
8.2 If either party is in breach of the Agreement after the Agreement is
effective, the other party has the right to ask for remedy within a
certain time period; or delay asset transfer or delay payment or
terminate the Agreement. It also has the right to claim compensation
and penalty from the breach party.
8.3 If either party is in breach of the Agreement after all assets have
been transferred or full payment has been made according to the terms
of the Agreement, the other party has the right to claim compensation
and penalty from the breach party.
8.4 If the Agreement is terminated due to severe breach of the Agreement
by one party, the breach party should pay 10% of the total amount of
the Contract to the other party for compensation.
8.5 If both Parties are at fault, then each party is responsible for its
own actions.
ARTICLE 9 DISPUTE SETTLEMENT
Any disputes arising from the execution of or in connection with the
Agreement shall be settled through friendly consultations between both
Parties. In case no settlement can be arrived through consultations,
the dispute shall be submitted to Beijing Arbitration Commission for
arbitration. The arbitration decision is final and binding for both
parties.
ARTICLE 10 NOTICE
Any notice or other connection between the parties must be in written
format and may be delivered by person or sent by fax, express or
registered post. The sender should pay postage.
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ARTICLE 11 EFFECTIVE DATES AND OTHERS
11.1 The condition of the Agreement to be effective: Execution by legal
representatives or authorized representatives of both parties and
sealed with both corporate seals.
11.2 Both Parties agree:
The Agreement will take effect on June 22, 2001. Prior to the
effective day, the Transferor owns and bears all the liabilities and
rights related with Transfer Assets. From the effective date of this
Agreement up to the day the Transferee completes all the payments and
obtains full ownership of the Transfer Assets, all revenues and
expenses related to the operations of the Transfer Assets accrue to
the Transferee. At the same time the Transferee will take proportional
ownership of the Transfer Assets. After the Transferee completes all
payments, the Transferee will retain full ownership of the Transfer
Assets with all its rights and privileges.
11.3 The parties will cover any omissions with Supplementary Agreements.
This Agreement and all the Supplements is deemed to have the same
legal force.
Party A: Party B:
Legal Representative: Mingming Lu Legal Representative: Xia Gao
Date: June 22, 2001 Date: June 22, 2001
-7-
EXHIBIT C
AGREEMENT FOR TRANSFER CHINADNS ASSETS
PART I
This Agreement made by the following parties on February 26, 2003 in Beijing,
P.R. China.
China Enterprise ASP Limited, a company duly incorporated under the laws of SAR
Hong Kong and having the registered address at Suite 605-6, Bank of America
Center, 12 Harcourt Road Central, Hong Kong (Hereafter "Party A")
SINO-I.COM LIMITED, having the registered address at Suite 605-6, Bank of
America Center, 12 Harcourt Road Central, Hong Kong (Hereafter "Party A
Guarantor")
Infornet Investment Limited, a company duly incorporated under the laws of SAR
Hong Kong and having the registered address at 14th Floor, Hutchison House, 10
Harcourt Road, Hong Kong (Hereafter "Party B")
Xin Net Corp., having the registered office at 950 - 789 West Pender Street,
Vancouver, BC, V6C 1H2 (Hereafter "Party B Guarantor (A)")
Xiaoqing(Angela) Du, of 909-1348 Barclay Street, Vancouver, BC, Canada V6E 1H7 ,
(Hereafter "Party B Guarantor (B)")
("Party B Guarantor (A)" and "Party B Guarantor (B)" collectively "Party B
Guarantor")
WHEREAS:
1. As a share transferor, Party B will urge Party A to sign "Xin Net
Telecom Corp. Ltd. .(Hereafter "XinWang") Share Transfer
Agreement"(Hereinafter "XinWang Share Transfer Agreement") with Party B
and will sell its owned 80% of XinWang shares / rights and interests to
Party A.
2. Party B agrees to urge the original shareholders (e.g. Mingming Lu, Xin
Wei and Kun Wei) of Beijing Xin Hai Technology Development Ltd. (Here-
after "XinHai") to sign "Beijing Xinhai Technology Development Ltd.
Share Transfer Agreement" (Hereafter "XinHai Share Transfer Agreement"
with Mr. Changhai Yu and Shenzhen Xingpengtai Investment Ltd. at the
same day when XinWang Share Transfer Agreement is signed and XinHai
will sell all its owned shares / rights and interests to Mr. Changhai
Yu and Shenzhen Xingpengtai Investment Ltd.
(The above shares/rights and interests transfer collectively called "The
Purchase") (The above "XinHai Share Transfer Agreement" and "XinWang Share Trans
-fer Agreement" collectively called "Share Transfer Agreements", and Share Trans
-fer Agreements and this Agreement collectively called "The Associated Agree-
ments").
As the above matter, Both Party A and Party B come to the following
agreement through friendly negotiation:
Article 1 Transaction Frame
1.1 Through negotiation, Party A and Party B unanimously agree that Party B
will transfer 80% of XinWang rights and interests to Party A and urge
XinHai original shareholders to transfer 100% of XinHai rights and
interests to Mr. Changhai Yu and Shenzhen Xingpengtai Investment Ltd. ("80%
of XinWang rights and interests" and "100% of XinHai rights and interests"
hereafter collectively "The Rights and Interest"). At the same time, Party
A, Mr. Changhai Yu and Shenzhen Xingpengtai Investment Ltd. will purchase
the Rights and Interests by RMB cash in accordance with the terms and
conditions of "Share Transfer Agreements";
1.2 Both parties agree that the prophase investigation related to purchasing
the Rights and Interests is based on the financial report of XinWang and
XinHai as of August 31, 2002;
1.3 Party B warrants that after Party A finishes the Rights and Interests
purchase:
(i) itself and XinHai(the other shareholder of XinWang who holds 20%
of XinWang rights and interests) will no longer engage in the same
or similar business with XinHai and XinWang in China or outside of
China in any method;
(ii) XinHai original shareholders will no longer engage in the same or
similar business with XinHai and XinWang in China or outside of
China in any method.
Article 2 Representations, Warranties and Covenant of Party A, Party B and its
Guarantors
2.1 Party B warrants to provide Party A with related materials and
information of XinWang and Xinhai well and truly without omitting and
holding back.
2.2 Except the requirement of government departments or laws, regulations and
rules, Either party cannot disclose the related contents in the Agreement
or any materials and information of the other party obtained from signing
this Agreement to any third party (except lawyer and accountant hired by
the party) in any method;
2.3 Both Party A and Party B agree to sign Share Transfer Agreements on or
prior to February 26, 2003; 2.4 The above representations, warranties and
covenant should still be effective after the Associated
Agreements are performed;
2.5 Party A Guarantor should bear the related responsibility for Party A's
obligations and covenant in the Associated Agreements;
2.6 Party B Guarantor should bear the related responsibility for Party B's
obligations and covenant in the Associated Agreements.
Article 3 The Rights and Interests Transfer Schedule
3.1 Both Party A and Party B agree to first sign the Agreement on December
10, 2002;
3.2 Party A should start prophase investigation on XinWang and XinHai on
December 11, 2002 and should finish the investigation before January 10,
2003;
3.3 After Party A finishes the above prophase investigation and makes active
analysis and evaluations, and satisfies with the results, Party A, Party
B, XinHai original shareholders urged by Party B and related guarantor,
XinHai and XinWang will sign "XinWang Share Transfer Agreement" and
"XinHai Share Transfer Agreement" on or prior to February 26, 2003;
3.4 After "Share Transfer Agreements" are effective, Party A and Party B
(XinHai original shareholders, Mr. Changhai Yu and Shenzhen Xingpengtai
Investment Ltd.) should immediately start to handle all the legal pro-
cedures for the Rights and Interests Transfer and turn Party A, Mr.
Changhai Yu and Shenzhen Xingpengtai Investment Ltd. into legal owner of
the Rights and Interests.
Article 4 Transaction Reward and its Payment
4.1 In order to encourage Party B to cause Party A successfully purchase the
Rights and Interests and to actively cooperate with Party A during the
period of performing the Associated Agreements, after the Associated
Agreements are signed and effective, Party A agrees to pay Party B or
other people or other company specified by Party B the Transaction Reward
total RMB (Y) 6,200,000, which will be paid in three stages; 4.1.1 On the
same day of share transfer prepayment in accordance with the terms of
"XinWang Share
Transfer Agreement" and "XinHai Share Transfer Agreement", Party
A or the third party specified by Party A should pay Party B or
other people or other company specified by Party B 15% of the
Transaction Reward, the sum of RMB (Y)930,000;
4.1.2 On the same day of the first stage payment of the Share Transfer
Price in accordance with the terms of "XinWang Share Transfer
Agreement" and "XinHai Share Transfer Agreement", Party A or the
third party specified by Party A should pay Party B or other
people or other company specified by Party B 45% of the
Transaction Reward, the sum of RMB (Y) 2,790,000;
4.1.3 On the same day of the last stage payment of the Share Transfer
Price in accordance with the terms of "XinWang Share Transfer
Agreement" and "XinHai Share Transfer Agreement", Party A or the
third party specified by Party A should pay Party B or other
people or other company specified by Party B 40% of the
Transaction Reward, the sum of RMB (Y) 2,480,000.
4.2 If any agreement of the Associated Agreements is terminated not because
it is completely performed, Party B should immediately return all
received Transaction Reward to Party A or other people or other company
specified by Party A without any condition;
4.3 If Party B is not in fundamental breach of the Agreement (the definition
of "Fundamental Breach of the Agreement in "XinWang Share Transfer
Agreement" can be applied here) and Party A unilaterally requires to
terminate "Share Transfer Agreements"(exclusion of Article 6.1.5 of
"XinWang Share Transfer Agreement"), Party A should pay Party B 15% of
Transaction Reward as compensation on the Agreement termination day; If
Party A is not in fundamental breach of the Agreement and Party B
unilaterally requires to terminate "Share Transfer Agreements"(exclusion
of Article 6.1.5 of "XinWang Share Transfer Agreement"), Party B should
pay Party A 15% of Transaction Reward as compensation on the Agreement
termination day.
Article 5 Applicable Laws
The formation of this contract, its validity, interpretation, execution and
settlement of the disputes shall be governed by the related laws of the People's
Republic of China.
Article 6 Settlements of Disputes
All disputes among the Parties arising from this Agreement shall be settled
through friendly negotiation. In case no settlement can be settled through
negotiation, any Party has the right to submit such dispute(s) to jurisdictional
court.
Article 7 Effectiveness, Modification and Termination of The Agreement
7.1 The Agreement becomes effective on conditions as follows:
7.1.1 Both parties or their authorized representatives sign or seal
with the company seal on the Agreement;
7.1.2 "The Associated Agreements" are signed at the same time;
7.1.3 "The Associated Agreements" become effective at the same time.
If any of the Associated Agreements is not effective or
terminated not because it is completely performed, other
Agreements will be terminated at the same time.
7.2 The Agreement shall terminate whenever any of the following items happens:
7.2.1 The Agreement is completely performed;
7.2.2 Both parties agree to terminate this Agreement in writing;
7.2.3 Any termination item stated in "the Associated Agreements"
happens and cause any of the Associated Agreements terminate;
7.2.4 After Party A finishes prophase investigation and figures it can
not sign "XinWang Share Transfer Agreement" and / or "XinHai
Share Transfer Agreement", the Agreement will be terminated when
Party A sends a written notice to Party B.
7.3 Any modification and alteration of the Agreement should be signed by both
parties through negotiation in written format.
7.4 The results of termination of the Agreement: the termination of the
Agreement does not affect the compensation rights of either party to
another party, who gets loss and expense (including lawyer fee and
lawsuit fee) because of the termination.
Article 8 Miscellaneous
8.1 There are five (5) original copies of the Agreement. Every party keeps
one original copy of the Agreement. Every original copy has equal law
effect.
8.2 Party A and Party B warrants separately it has full power, right and
authority to sign and perform the Agreement.
8.3 The Agreement is signed by the authorized representatives of both parties
in Beijing City of People's Republic of China on February 26, 2003.
Party A: China Enterprise ASP Limited
Authorized Representative: /s/ Pinhai Yu
-------------
Party A Guarantor: SINO-I.COM LIMITED
Authorized Representative: /s/ Pinhai Yu
-------------
Party B: Infornet Investment Limited
Authorized Representative: /s/Xiaoqing(Angela) Du
----------------------
Party B Guarantor (A): Xin Net Corp
Authorized Representative: /s/Xiaoqing(Angela) Du
----------------------
Party B Guarantor (B): Xiaoqing Du
Authorized Representative: /s/Xiaoqing(Angela) Du
----------------------
Date: February 26, 2003
PART II
This Agreement made by the following parties on February 26, 2003 in Beijing,
P.R. China.
Transferor: Infornet Investment Limited, a company duly incorp-
orated under the laws of SAR Hong Kong and having the
registered address at 14th Floor, Hutchison House, 10
Harcourt Road, Hong Kong (Hereafter "Party A")
Transferee: China Enterprise ASP Limited, a company duly
incorporated under the laws of SAR Hong Kong and
having the registered address at Suite 605-6, Bank of
America Center, 12 Harcourt Road Central, Hong Kong
(Hereafter "Party B")
Transferor guarantor A: Xin Net Corp. (Hereafter "XNET"), having the register
-ed office at 950 - 789 West Pender Street,
Vancouver, BC, V6C 1H2
Transferor guarantor B: Xiaoqing(Angela) Du, of 909-1348 Barclay Street,
Vancouver, BC, Canada V6E 1H7.
(Transferor guarantor A and Transferor guarantor B
(collectively "Transferor guarantor" or "Party C"))
Transferee guarantor: SINO-I.COM LIMITED, having the registered address at
Suite 605-6, Bank of America Center, 12 Harcourt Road
Central, Hong Kong (Hereafter "Party D")
WHEREAS:
1. Transferor is a shareholder who owns 80% shares of Xin Net Telecom Corp.
LTD.(Hereafter "XinWang") ;
2. Transferee is a company duly incorporated under the laws of SAR Hong Kong;
3. Transferor guarantor A is a company duly incorporated under the laws of
Florida, public listed on NASDAQ
and trading on the OTC Bulletin Board, and has 41,360,010 outstanding shares
as of December 30, 2002.
4. Transferor guarantor B is a Canada citizen, currently president of XNET, and
owns 2,760,000 shares of XNET as of December 30, 2002.
5. Party D is a company duly incorporated under the laws of SAR Hong Kong,
public listed on Hong Kong Stock exchange (Trading symbol: 0250), and
has 13,914,504,877 outstanding shares as of the date showing on the
beginning of this Agreement.
6. Transferor agreed to sell all its owned shares of XinWang to Transferee
and Transferee agreed to purchase the shares; Party C and Transferor
consent to bear the related responsibility for Transferor in this
Agreement; Party D and Transferee consent to bear the related
responsibility for Transferee in this Agreement; (the above share
transfer action hereafter "The Purchase")
7. Transferee has made a prophase investigation on XinWang before signing
this Agreement (Hereafter "Prophase Investigation"). The parties
definitely know that Prophase Investigation is not complete, some of
the important items such as customer information, technical documents
and management platforms have not been disclosed to Transferee, and
some of the important files, certificates and licenses and materials
have not been confirmed with the original documents by Transferee;
8. Transferor promised to provide the above mentioned materials according
to Supplement B "Anaphase Investigation List" on the signing day of
this Agreement and at the same time arrange Transferee's staff to
confirm all the materials. The accomplishment of Anaphase Investigation
is the necessary condition of the first stage payment under this
Agreement;
9. Party A, B, C and D all agreed to cooperate to complete the share transfer
between Transferor and Transferee.
As a matter of XinWang share transfer, the above parties come to the following
agreement in order to assure their obligation and right:
Article 1 Definition
1.1 Other than specifically specified, the following terms in this Agreement
have the meanings as follows: 1.1.1 "Shares of XinWang means 80% of XinWang
shares Transferor beneficially owns and will be transferred to Transferee
according to this agreement;
1.1.2 "Related Rights and Interests Transfer" means the domain name
reseller right and related domain name ownership, which is
listed in Supplement C of this agreement or confirmed no
transfer risk by Transferee and signed with Domain Name
Registry, which Transferor and Party C promise to urge
XinWang and related persons jointly handle the procedure
according to the Agreement and will be transferred to the
company specified by Transferee before the last payment,
Transferee will not need to make extra payment for this kind
of rights and interests except the share transfer payment;
1.1.3 "Related Period" means the period from the Agreement signing
day to transfer complete day (inclusive of the above days);
1.1.4 "Business Day" means Monday to Friday (Except statutory
holiday);
1.1.5 "Related Agreement" means Beijing XinHai Technology
Development Ltd. (Hereafter "XinHai") "Share Transfer
Agreement" among the shareholders of XinHai (namely Mingming
LU, Xin Wei and Kun Wei) and Mr. Changhai Yu and Shenzhen
Xingpengtai Investment Ltd., which is based on this
Agreement, to which Transferor guarantor and Transferee
guarantor also have responsibility and obligation, and to
which Supplement A - I of this Agreement are also applicable
except specifically specified;
1.1.6 "The Agreement Signing Date" means the date showing on the
beginning of this Agreement signed by all the Parties;
1.1.7 "The Agreement Effective Date" means the date that the
Agreement is legally effective when the conditions stated in
Article 4 of the Agreement are met;
1.1.8 "The Closing Date" means the date when Transferee has made
the last stage payment and when the both party sign
Supplement H "Hand over Confirmation";
1.1.9 "Audit Benchmark Date" means the date that Party B and Party
A jointly set up when Party B started Prophase Investigation,
namely August 31, 2002;
1.1.10 "Financial Information" means the information listed in
Supplement D, namely Asset and Liability sheet and Bank
information;
1.1.11 "Intangible Asset and Qualification" means the intangible
asset and corporate operation qualification which are listed
in Supplement E "Intangible Asset and Qualification List";
1.1.12 "Business and Customer Resource" means the resources listed
in Supplement F "Business and Customer Resource" including
but not limit to high level agent right, low level customers
and agents ;
1.1.13 "Hand over Confirmation" means Supplement H, the confirmation
document showing that the transfer under the Agreement has
completed;
1.1.14 "Management Team" means the staff listed in Supplement I;
1.1.15 In this Agreement, except specifically specified, "XinWang"
includes all its subsidiaries and branches; 1.1.16 In this
Agreement, except other explanation, the mentioned people
include natural person, legal person and other organization;
the mentioned any people, company, government institution,
and organization includes its heir; the mentioned contract or
agreement includes its Supplement and addendum; the mentioned
article and Supplement only refers the Article and Supplement
of this Agreement;
1.1.17 The title of this Agreement is used for convenience and is
not applicable to the Agreement explanation.
Article 2 Share Transfer
2.1 In accordance with the Agreement, Transferor agreed to transfer its owned
80% of XinWang shares to Transferee;
2.2 After the Agreement is effective, Transferee will own all the rights
related with XinWang shares according to the Agreement and Transferor will
not own any right related with XinWang shares exclusion of any other
agreement between Transferor and Transferee (Transferor is solely
responsible for all the liabilities coming from XinWang shares before the
Closing Date);
2.3 From the Agreement signing date, Transferee has the right to arrange one or
two representatives to assist Transferor accomplish all the legal
procedures including but not limit to share transfer registration and
related interests transfer in XinWang. The above legal procedures should
acquire a written approval from related government department and obtain a
business license reissued by Industry and Commerce Bureau within 60 days
after the Agreement signing date or some other date agreed by all the
parties (some other date should be within 50 days upon a written approval
by all the parties)
Article 3 Transfer Price and Payment
3.1 Transferor and Transferee agree that the transfer price of the XinWang
shares is RMB (Y)11,000,000 (Hereafter "Share Transfer Price"). Share
Transfer Price includes related interests cost and Transferor will accept
the payment of Share Transfer Price as an integral.
3.2 All parties agree the payment and condition of Share Transfer Price as
follows:
3.2.1 Prepayment:
3.2.1.1 Transferee will pay Transferor 15% of Share Transfer Price, namely
RMB(Y)1,650,000 as prepayment within 5 business days after the
Agreement effective date.
3.2.1.2 From the Agreement effective date, Transferor and Transferee unanimous
-ly agree:
(1) Transferee will send financial representative to XinWang for
understanding and inspecting financial operation including but not
limit to checking XinWang bookkeeping, financial report, cash
deposit and bank statement, and inspecting all the cash flow and
financial standardization process. Transferor agrees to urge
XinWang management team to cooperate;
(2) In accordance with Supplement B "Anaphase Investigation List",
Transferee starts Anaphase Investigation and Transferor agrees to
urge XinWang management team to cooperate;
(3) Transferor and Transferee starts to jointly handle XinWang shares
transfer process, including but not limit to changing directors,
modifying Article of Association and Industry and Commerce Bureau
approval procedures;
(4) Transferor will urge XinWang, XNET, XinHai, and related people to
start processing related interests transfer listed in Supplement
C;
(5) Transferee has the right to accredit technical staff and operation
staff to XinWang to understand and inspect its technical operation
activity, and Transferor agrees to urge XinWang management team to
cooperate. Transferee and its accredited staff should sign
"Confidential Agreement" with XinWang and the daily accredited
staff should not surpass three persons;
(6) Without written permission of Transferee, Transferor can not
dispose XinWang assets, shares and interests as well as issuing
stock option;
(7) Without written permission of Transferee, Transferor should assure
XinWang management not to change important strategy and policy of
XinWang.
3.2.2 The first stage payment:
3.2.2.1 On the day when all the conditions listed in this item and the first
stage payment conditions of the Related Agreement are met, Transferee
will make first stage payment to Transferor, namely 60% of Share
Transfer Price (Prophase payment will be included in the first stage
payment), total amount of RMB(Y)6,600,000:
(1) Transferor and Transferee have the same cognizance that the share
transfer has no risk. If Industry and Commerce Bureau issues
"Notice of Accepting the Case", the share transfer will be treated
as no risk (If the share transfer accomplishment or cognizance of
no risk time for the Related Agreement is not consistent with this
Agreement, the latter one will be counted.);
(2) After finishing Anaphase Investigation and the written
confirmation is made by Transferor and Transferee (Transferee can
not refuse to sign the confirmation without proper reason).
3.2.2.2 From the date that Transferee makes the first stage payment, Transferor
and Transferee have the following rights and obligations:
(1) Transferee will completely know and inspect the operation and
management of XinWang and has the following approve rights
including but not limit to:
i. Transferee has the final approve right for over
RMB(Y)2,000 (including 2,000) of XinWang's single
payout and over RMB(Y)20,000 (including 20,000)
accumulated monthly payout from the Agreement signing
date. The above payout will be treated as abnormal
payout without written approval of Transferee;
ii. Transferee has the final approve right for all the
contracts, agreements and receipts signed by XinWang
during the related period;
iii. Transferee has the final approve right for changing
or releasing from employee contract of two or more
than two high level managers (referring senior
manager) or technical persons (referring all the
staff of Base Operation Department and Value Added
Business Department), or appointing employee with
over RMB(Y)3,000 monthly salary.
(2) Transferee has the right to obtain all the technical material,
files, and information and hold the operation and maintenance
technology of XinWang business platform and management platform;
(3) Transferee has the right to acquire all the business and customer
materials of XinWang; (4) Transferee has the right to acquire all
the materials related with the operation of XinWang; (5) Trans-
feree and transferor will check and verify each item in accordance
with Supplement H "Hand over Confirmation".
3.2.3 The last stage payment:
On the day that all the conditions listed in this item and all the
conditions of the last stage payment in the Related Agreement are met,
Transferee will make the last stage payment to Transferor, namely 40%
of Share Transfer Price, RMB(Y)4,400,000;
3.2.3.1 Transferor submits the reissued "Business License" to Transferee after
share transfer (If the time of submitting the reissued "Business
License" in the Related Agreement is different, the latter one will be
count.);
3.2.3.2 After finishing transfer the related interests listed in Supplement C
or Transferee affirms the transfer as no risk;
3.2.3.3 Transferor will train the staff send by Transferee and provide all the
information of operation and maintenance of XinWang platforms including
but not limit to password etc.;
3.2.3.4 Transferor and Transferee sign "Hand over Confirmation".
3.2.4 Transferee has the right to release any of the conditions in Item
3.2.1, 3.2.2, and 3.2.3. at anytime in written format.
3.2.5 Payment Confirmation
3.2.5.1 Transferor hereby affirms that Transferee has performed the obligation
of Share Transfer Price payment when Transferor or the third party
specified by Transferor receives Share Transfer Price from Transferee
or the third party specified by Transferee in accordance with the
Agreement;
3.2.5.2 Transferee has completed the obligation of the payment when Transferor
or the third party specified by Transferor receives the last stage
payment from Transferee or the third party specified by Transferee;
3.2.5.3 Transferor should issue a receipt to Transferee on the same day when
Transferor or the third party specified by Transferor receives any
stage payment from Transferee or the third party specified by
Transferee.
3.2.6 Party D covenants and undertakes that on the premise that Transferor
and Party C perform their obligations in time, if Transferee could not
make the payment in time, this sum of payment will turn into due
liability of Transferee which Party D is responsible for.
Article 4 The Agreement effective conditions
The Agreement will take effect on the day when all the following conditions are
met:
4.1 All parties or their authorized representatives sign or seal with the
company seal on the Agreement;
4.2 The Agreement and the Related Agreement are signed at the same time;
4.3 The Agreement and the Related Agreement take effect at the same time;
4.4 Transferor submits with Transferee a written statement issued by XNET
which indicates that until the Agreement signing day XinWang does not
have any liabilities or debt to XNET.
Article 5 Representations, Warranties and Covenant
5.1 Representations, Warranties and Covenant of Transferor and Party C
Transferor and Party C hereby represent, warrant and covenant
respectively and jointly that:
5.1.1 The related rights and abilities of Transferor and Party C
5.1.1.1 Transferor and Party C have full right and authority to enter into this
Agreement on the terms and conditions herein set forth and implement
all the liabilities and responsibilities of the Agreement. Transferor
and Party C were not in breach of the Laws, regulations, statutes and
rules when signing this Agreement. As a matter of XinWang shares trans-
fer, Transferor has obtained all the required authorization and
approval before signing the Agreement, therefore, Transferor can
complete XinWang share transfer on the condition of no restrictions;
5.1.1.2 The authorized representative of Transferor who signs on the Agreement
has been authorized signing the Agreement according to a power of
attorney, Board resolution, or shareholder meeting resolution;
5.1.1.3 Until the Agreement effective day, except that Transferor and Xinhai
are shareholder of XinWang, XinWang is not a subsidiary of any other
people or a company controlled by any other people and no other people
has the right to put forward any requirement on XinWang shares,
interests, or options;
5.1.1.4 There is no lien, mortgage, leasehold, third party right and any
disposal or other any agreement, arrangement or covenant for the
transfer shares that will induce the above actions happening with the
share transfer.
5.1.2 About XinWang
5.1.2.1 XinWang is a Joint Venture company duly incorporated under the laws of
P. R. China (Its registered information seen Supplement A), and has the
rights to hold and carry on its currently holding and carrying on
assets and business according to the Chinese Laws. XinWang has obtained
all the approvals, consents, authorizations, and permissions which are
effective and promissory for its business operation demand. Until the
Agreement Signing Date, XinWang does not have any production, operating
contracts and arrangements which exceed its operating arrange or which
is in abnormal business situation.
5.1.2.2 Validity
XinWang is not in breach of any laws, regulations, and rules, did not
involve any administrative, civil, criminal, economical, or other
dissension, litigation, and arbitration, and was not punished or closed
down by the government; Transferor warrants to let Transferee know any
above proceedings if any thing happens before the Agreement Closing
Date or if any thing would happen after the Agreement Closing Date.
5.1.2.3 Financial Status:
(1) Supplement D is completely showing Asset and Liability of XinWang,
and clearly listing Cash, Fixed asset, Depreciation and
Amortization, Accounts Receivable and Accounts Payable without
pretermission or holding back any debt or unconsummated loss
(including budget loss) until December 31, 2002;
(2) Exclusion of the items listed in Supplement D, XinWang does not
have any unpaid loan, debt or other liability to Bank or third
party. Before the Agreement Effective Date, XinWang did not
receive any written notice of loaner to dispose part or whole of
assets of XinWang;
(3) XinWang is not in breach of any Chinese Tax Law, decree,
regulation, and rule and is not able to be sued by the government
because of tax related problems. All due taxes required by
government law will be paid before the Closing Date (including any
fines caused by late payment)
5.1.2.4 Company Status and Others:
The company registration information, intangible assets, qualification,
business and customer resource, contracts and obligations of XinWang
are consistent with the Supplement of the Agreement. The technologies
XinWang is holding include but no less than guaranteed Domain Name
Registration, Virtual Host, Web Hosting, and Web Site Design etc. well
operating technologies. Until The Agreement Signing Date, XinWang and
XinHai have no less than 180 employees including no less than 30
professional personnel.
5.1.2.5 Contracts:
Until the Agreement Effective Date, XinWang does not sign or arrange
any agreements or legal files that is not necessary for its business
and it has the following features:
a. XinWang is not capable to perform its terms and conditions;
b. It can be expected that after performing its terms and condi-
tions XinWang may not acquire profit or may get loss;
c. XinWang cannot finish it in time or need extra expenses to
finish it;
d. XinWang may get into trouble or incur abnormal, rigorous, or
extra liability or expenses;
e. XinWang need pay whoever the commission, introduction fee or
tax on books;
f. It is not necessary or not important to carry on XinWang busi-
ness.
5.1.3 The Related material and information of XinWang disclosed to Transferee
All the material and information of XinWang (including but not limit to
the information listed in Supplement) in this Agreement and in the
Related Agreement and disclosed to Transferee by Transferor are
integral, true and exact without omitting and holding back.
5.1.4 Proceedings after Audit Benchmark Date
From Audit Benchmark Date (August 31, 2002) to the Closing Date,
Transferor and Party C warrant that XinWang will not do as follows
without written permission of Transferee:
5.1.4.1 Changing corporation format;
5.1.4.2 Modifying (increasing or canceling) contracts or Article of
Association of Xin Wang;
5.1.4.3 Appointing director (except appointed by Transferee);
5.1.4.4 Reorganizing, merging or acquiring;
5.1.4.5 Loaning from any third party or its shareholder;
5.1.4.6 Giving any third party or its shareholder surety or mortgage;
5.1.4.7 Selling or purchasing any assets (except listed in Supplement
D);
5.1.4.8 Accepting any debt or liability;
5.1.4.9 Leasing any real estate;
5.1.4.10 Except regular operation, XinWang will not take any action to
incur bad or negative effect on its business;
5.1.4.11 Signing or modifying employment contract with any employee or
increasing salary and benefit (including compensation);
5.1.4.12 Carrying on accommodation or relinquishment of any civil,
criminal, economical or other dissension, lawsuit, and arbi-
tration (except as disclosed to Transferee and with written
permission of Transferee);
5.1.4.13 Tampering with XinWang accounting books.
5.1.5 Employee Stability
Transferor warrants and urges XinWang to stabilize its employees which
are listed in Supplement I, and keep no less than 90% of managers, base
business department and value added business department personnel of
XinWang and XinHai, and all the employees of XinWang and XinHai working
for XinWang and XinHai before the Closing Date, who will not resign
within three months after The Closing Date (Except layoff by
Transferee).
5.1.6 Results after XinWang shares Transfer
After Transferee acquires XinWang shares, Transferor warrants the
results as follows:
5.1.6.1 will not release any people's liability for XinWang (no matter
it is restricted by the Agreement or is legal) or will not
bring on XinWang giving up its right under any agreement or
legal documents;
5.1.6.2 will not conflict with or be in breach of other agreements or
legal documents having signed by XinWang;
5.1.6.3 will not incur its loaner to chase back the current or future
debt immediately;
5.1.6.4 will not be in breach of the current laws, regulations,
decrees and rules.
5.1.7 Competition Prohibition
5.1.7.1 After the Agreement Signing Date, Transferor and Party C individually
and jointly agree not to start any similar business and activity
(including but not limit to operating a business directly or indirectly
through joint venture, or holding shares of other companies or
enterprises) which directly or indirectly compete with XinWang in China
and outside of China;
5.1.7.2 Transferor and Party C individually and jointly agree not to use the
names and graphs etc. that are the same or similar to any intellectual
properties in the Agreement and Related Agreements including but not
limit to trademark, company name, brand name (such as "XinWang"),
domain name, web address etc. in any area, any time, and any method.
5.1.8 Transferor and Party C shall not make and approve any action and
negligence that act against above presentations, warrants and covenant
prior to the Closing Date (If the Closing Date for the Related
Agreements is not the same, the latest Closing date shall be used).
Even after the Closing Date, the above presentations, warrants and
covenant shall still be effective.
5.1.9 Transferor and Party C confirm that Transferee signs the Agreement
based on the presentations, warrants and covenant of Transferor and
Party C in Article 5.1 of this Agreement.
5.2 Presentations, Warranties and Covenant of Transferee and Party D
Transferee and Party D individually and jointly present, warrant and
covenant that:
5.2.1 Transferee is a company duly incorporated under the laws of SAR
Hong Kong;
5.2.2 Transferee has all rights, powers and authority for signing this
Agreement and fulfilling the obligations in this agreement, and
has obtained all company's internal consent, permission,
approval, registration, and exemption etc. that are necessary
for Transferee to sign this Agreement;
5.2.3 The authorized representative of Transferee signs this agreement
according to effective power of attorney, resolution of board of
directors, or resolution of shareholder's meeting;
5.2.4 Transferee and Transferor shall deal with any other affairs
together during the above share transfer process in accordance
with Chinese laws;
5.2.5 If Transferor and Party C do not disobey this Agreement,
Transferee shall make payment for share transfer according to
the stated date and method of the Agreement;
5.2.6 Even after the Closing Date, the above presentations, warrants
and covenants shall still be effective.
5.3 Disclosing Obligation in Time
During related periods, if any party or several parties in this
Agreement find whatever action, activity or event may be badly
inconsistent with its presentations, warrants and covenants or cause
its presentations, warrants and covenants error, the party or parties
shall inform the other party or parties in written format.
5.4 Independence of the Covenant Article
The covenant Article in this Agreement is independent and can be
divided. Except clearly defined in this Agreement, any covenant article
is not subject to or bound into any other articles in this Agreement.
Article 6 Termination and Cancellation of The Agreement
6.1 The Agreement shall terminate whenever any of the following items
happens:
6.1.1 The parties mutually agree to terminate this Agreement in writing;
6.1.2 If Transferor and/or Party C breach their presentation, warrants and
covenant as defined in the Agreement, and do not inform the other
parties properly, Transferee requests to terminate the Agreement;
6.1.3 If Transferor and/or Party C do not breach the agreement, and
Transferee does not make payment for share transfer according to the
term in this Agreement, Transferor requests to terminate the Agreement;
6.1.4 The Agreement is terminated according to Chinese laws, regulations, and
the terms and conditions of this Agreement;
6.1.5 Any transfer document terminates, or becomes invalid (except as the
documents have been fulfilled or are expired), or cannot be performed
due to any reason; or it is predicted that above mentioned affairs will
happen; or the related responsibility and obligation cannot be
performed or become illegal;
6.1.6 When the Agreement and Related Agreements are completely fulfilled, the
presentations, warrants and covenants of every party shall not be
released due to the termination of the Agreement and Related
Agreements.
6.2 The notice for the termination and/or cancellation of the Agreement
shall be in written format and the termination does not affect the
compensation rights of the party, who obeys the Agreement, to the party
who breaches the Agreement.
Article 7 Transfer of the Agreement
7.1 Without permission of Transferee, Transferor cannot transfer any its
obligation in the Agreement to others.
7.2 Transferee has right to transfer any obligation and any right defined
in the Agreement to others. If Transferee transfers any obligation and
any right defined in the Agreement to other party or parties,
Transferee shall jointly bear the responsibility in accordance with the
terms and conditions of the Agreement.
Article 8 Confidentiality
8.1 Except the requirement of government departments or laws, regulations
and rules, without permission of other parties, any party cannot
disclose the related contents in the Agreement to any third party
beyond the Agreement before the Closing Date (except lawyer and
accountant hired by the party);
8.2 Except the requirement of government departments or laws, regulations
and rules, without permission of other parties, any party cannot
disclose the corporate information and technical information of the
other parties obtained in the transaction to any third party after the
Closing Date.
Article 9 The Other Matters not Included in the Agreement
Every party shall friendly negotiate any other matters that are not included in
the Agreement and sign supplemental agreement in written format. The
supplemental agreement shall be a binding part of the Agreement and has equal
legal effect.
Article 10 Notice
10.1 All notices shall be submitted in written and shall be sufficiently
given if delivered personally, or transmitted by facsimile or mailed by
prepaid mail (oversea mail should be send by air) addressed to the
receiving Party at its address set below. Each Party shall promptly
notify the others of any change of its address in written format.
10.2 All notice shall be delivered to the receiving party using following
address, fax number and the contact person:
Party A: Infornet Investment Limited Party B: China Enterprise ASP Limited
Address: Room 1858, Address: A-21 Xisanhuanzhong Rd.
New Century Office Tower Haidian District, Beijing
Beijing, 100044 100036
Fax: 010-6849-2758 Fax: 010-6398-3707
Contact: Xiaoqing Du Contact: Dan Chen
Transferor guarantor A: Transferor guarantor B:
Xin Net Corp Xiaoqing Du
Address: 950-789 West Pender Street Address: 909-1348 Barclay Street
Vancouver, BC, Canada Vancouver, BC, Canada
Party D: SINO-I.COM LIMITED
Address: Suite 605-6, Bank of America Center,
12 Harcourt Road Central, Hong Kong
Fax: 00852-2505-4847
Contact: Jiabao Qu
10.3 Under the following situations, it is deemed as delivery:
10.3.1 Submission in person;
10.3.2 If delivery by mail, three (3) business days after the mail is received
by post office (if by airmail, 5 business days);
10.3.3 Submission by fax when the transmission is OK;
10.3.4 To prove the delivery of the notice, the sending party should have
sufficient proof that the notice has been delivered by hand, or the
envelope with the notice has correct address and name of contact person
and has been received by post office; or if delivery by fax, the
sending party should provide automatic confirmation from the fax
machine or the reply of receiving party whichever is first.
Article 11 Liabilities for Breach of the Agreement
11.1 Any of the followings constitutes breach of the Agreement
11.1.1 Breach of payment obligation: If Transferor and Party C are not in
breach of the Agreement, Transferee does not pay the money for mature
share transfer, and Transferee does not pay within five (5) business
days since Transferor sends a written notice, or every party does not
mutually agree to delay the payment;
11.1.2 Breach of liabilities: If any party does not fulfill or obey its
responsibilities, obligations and covenants in the Agreement, or
observant party thinks that the breach of liabilities can be redressed,
but delinquent party does not do any action that satisfies the
observant party within five (5) business days (or other period that
observant party agrees) when delinquent party has received the written
notice from observant party;
11.1.3 Breach of guarantees: Any party breaches its guarantees including but
not limit to its presentations, warrants and covenants; or any of its
presentations, warrants and covenants have untrue, incomplete or mis-
leading contents;
11.1.4 Fundamental breach of the Agreement: If every party agrees that the
breach of the Agreement is "serious", the breach of the Agreement is
deemed as fundamental breach of the Agreement;
11.1.5 Dissolution: Any party is dissolved, liquidated closed, reconstructed
and bankrupted, or any party has applied dissolution, liquidation,
closing, reconstruction and bankruptcy, or this procedure has began, or
such effective resolution has passed;
11.1.6 Ownership: The ownership of "XinWang" is changed no matter directly,
indirectly or finally, or related assets are mortgaged.
11.1.7 Approval: The approvals, registrations or procedures, which Transferor
and Transferee should have, have not been obtained, or expired, or
revised;
11.1.8 Disposition of assets: Transferor transfers, mortgages or disposes
"XinWang" in other methods; 11.2 Liabilities for breach of the
Agreement
11.2.1 If any breach of the Agreement occurs, or the agreement terminates due
to any other reasons except full performance, Transferor should return
all received payments to Transferee at the day when the agreement
terminates. Delinquent party should pay the compensation that is not
more than total amount of Share Transfer Price to observant party
according to actual loss;
11.2.2 If Transferee does not fundamentally breach the Agreement and
Transferor requests to terminate the Agreement unilaterally (except as
conditions in Article 6.1.5), Transferor shall pay the compensation
that equals to 15% of total amount of Share Transfer Price to
Transferee at the day when the agreement terminates; If Transferor does
not fundamentally breach the Agreement and Transferee requests to
terminate the Agreement unilaterally (except as conditions in Article
6.1.5), Transferee shall pay the compensation that equals to 15% of
total amount of Share Transfer Price to Transferor at the day when the
Agreement terminates;
11.2.3 Any liability for breach of the Agreement does not terminate due to
accomplishment of share transfer. Every party in the Agreement agrees
that any party can chase the liability for breach of the Agreement up
to the period of 36 months (from the Closing Date); But this period
does not include the period that observant party puts forward law suit
to delinquent party for chasing compensation. Observant party shall
send written notice to the delinquent party about related breach of the
Agreement and shall put forward law suit within 24 months after the
observant party has requested the compensation.
11.3 Settlement of Breach of the Agreement
11.3.1 When breach of the Agreement occurs, observant party shall send a
written notice to delinquent party and point out the reasons,
characters, and possible loss due to breach of the Agreement reasonably
and in detail.
11.3.2 Compulsory performance
11.3.2.1 If any party does not perform the Agreement (or breaches the
Agreement), observant party shall force the delinquent party to
perform the Agreement through law procedure;
11.3.2.2 This article cannot prohibit the observant party from taking any
other action or remedy;
11.3.2.3 This article cannot prohibit the observant party from requesting
other compensations beyond loss compensation, including interests
and any other losses or costs from not performing or completing
share transfer;
11.3.2.4 The prerequisite that observant party takes above actions is that
observant party sent a written notice to delinquent party prior to
five (5) business days, and requested the delinquent party to make
proper remedy within five (5) business days, and delinquent party
did not make proper remedy that satisfies observant party within
five (5) business days.
11.3.3 If any guarantees or any articles in the Agreement will or probably
become fundamental breach of the Agreement prior to the Closing Date,
observant party can send a written notice to delinquent party to cancel
the Agreement. Related cancellation action does not have any bad or
negative effect on any observant party's rights and/or compensation
right due to the action of breach of the Agreement. The compulsory
performance under the Agreement does not have any bad or negative
effects because of this Article;
11.3.4 The parties are not responsible for any requirement of the right coming
from laws and regulations which are effective, or altered or cancelled
after the Agreement Signing Date.
Article 12 Miscellaneous
12.1 Revision of the Agreement
When the Agreement is effective, no party can revise the Agreement
without written approvals from every party.
12.2 Exercise of observant party's rights
The action that observant party does not exercise its rights should not
be deemed as giving up. Any single or partially exercise of its rights
should not constitute the obstacle for further exercise of its rights.
The observant party's rights, powers and compensations endued by the
Agreement are accumulated and cannot replace or affect the observant
party's rights, powers and compensations endued by laws.
12.3 Independence of the Articles in the Agreement
If any articles in the Agreement is illegal, invalid or cannot be
preformed, or are declared to be illegal, invalid or unable to perform
by courts and arbitration organizations, the other articles in the
Agreement should still be legal, valid and executable and continue to
be effective.
Article 13 Settlements of Disputes
All disputes among the Parties arising from this Agreement shall be settled
through friendly negotiation. In case no settlement can be settled through
negotiation, any Party has the right to submit such dispute(s) to jurisdictional
court.
Article 14 Applicable Laws
The formation of this contract, its validity, interpretation, execution and
settlement of the disputes shall be governed by the related laws of the People's
Republic of China.
Article 15 Force Majeure
15.1 Force Majeure shall mean all events which are unforeseeable and
uncontrollable, the occurrence and consequences of which cannot be
avoided or overcome, and which obstruct or delay any party to perform
its obligation in accordance with the terms and conditions of the
Agreement. Such events shall include earthquakes, typhoons, flood,
fire, war, strike and other similar events which are accepted as Force
Majeure.
15.2 If an event of Force Majeure occurs and affects the performance of a
Party's obligations, the Party claiming Force Majeure shall promptly
inform the other Parties and shall provide a written document to
explain related details and the reasons that it cannot fully or
partially perform the Agreement, or delay the performance of the
Agreement within fifteen (15) business days. Whether delaying
performance of the Agreement or canceling Agreement or taking other
actions shall be friendly negotiated by every party and decide what to
do in written format within five (5) business days after every party
receives the notice.
Article 16 Supplements
The Agreement includes nine (9) Supplements from Supplements A to Supplements I;
All Supplements are undivided components of the Agreement and have equal legal
effect.
Article 17 Copies
17.1 The Agreement is written and explained in Chinese.
17.2 There are seven (7) original copies of the Agreement. Every party keeps
one original copy of the Agreement. Other two original copies are back
-up. Every original copy has equal law effect.
The Agreement is signed by the authorized representatives of Transferor,
Transferee, Party C and Party D in Beijing City of People's Republic of China on
the date first above written.
Transferor: Infornet Investment Limited
Authorized Representative: /s/Xiaoqing(Angela) Du
----------------------
Transferee: China Enterprise ASP Limited
Authorized Representative: /s/ Pinhai Yu
-------------
Transferor guarantor A: Xin Net Corp
Authorized Representative: /s/Xiaoqing(Angela) Du
----------------------
Transferor guarantor B: Xiaoqing Du
Authorized Representative: /s/Xiaoqing(Angela) Du
----------------------
Transferee guarantor (Party F): SINO-I.COM LIMITED
Signature of Authorized Representative: /s/ Pinhai Yu
-------------
Date: February 26, 2003
PART III
This Agreement made by the following parties on February 26, 2003 in Beijing,
P. R. China.
Transferor: Mingming Lu (Hereafter "Party A"), a Chinese citizen, of Suite
3-403, No.1 Building, Qianmachang ST., Xicheng District,
Beijing 100009, China.
Xin Wei (Hereafter "Party B"), a Chinese citizen, of Suite
3-403, No.1 Building, Qianmachang ST., Xicheng District,
Beijing 100009, China.
Kun Wei (Hereafter "Party C"), a Chinese citizen, of Suite
3-403, No.1 Building, Qianmachang ST., Xicheng District,
Beijing 100009, China
(Hereinafter collectively called "Transferor")
Transferee: Changhai Yu (Hereafter "Party D(A)"), a Chinese citizen, of
Medical Department of Beijing University, 38 Xueyuan Road,
Haidian District, Beijing, China.
Shenzhen Xingpengtai Investment Ltd. (Hereafter "Party D(B)"),
having the registered address at Suite 1804, Sangda Building,
Huafa North Road, Futian District, Shenzhen city, China.
(Hereinafter collectively called "Transferee")
Transferor guarantor A: Xin Net Corp. (Hereafter "XNET"), having the
registered office at 950 - 789 West Pender
Street, Vancouver, BC, V6C 1H2
Transferor guarantor B: Xiaoqing(Angela) Du, of
909-1348 Barclay Street, Vancouver, BC,
Canada V6E 1H7 , Canadian citizen.
(Transferor guarantor A and Transferor guarantor B
(collectively "Transferor guarantor" or "Party E"))
Transferee guarantor: SINO-I.COM LIMITED, having the
registered address at Suite 605-6, Bank of
America Center, 12 Harcourt Road Central,
Hong Kong (Hereafter "Party F")
WHEREAS:
1. Transferor is all the shareholders of Beijing XinHai Technology Development
Ltd. (Hereafter "XinHai") who totally own 100% shares of XinHai. The shares
are allocated as follows:
Party A 28.56%
Party B 35.72%
Party C 35.72%
Total 100%
Besides XinHai directly owns 20% shares of Xin Net Telecom Corp. Ltd.
(Hereafter "XinWang") (the above share transfer action hereafter "The
Purchase");
2. Party D(A) is a Chinese citizen;
3. Party D(B) is a company duly incorporated under the laws of China, register
-ed in Shenzhen on January 12, 1998;
4. Transferor guarantor A is a company duly incorporated under the laws of
Florida, public listed on NASDAQ and trading on the OTC Bulletin Board, and
has 41,360,010 outstanding shares as of December 30, 2002.
5. Transferor guarantor B is a Canada citizen, currently president of XNET,
and owns 2,760,000 shares of XNET as of December 30, 2002.
6. Party F is a company duly incorporated under the laws of SAR Hong Kong,
public listed on Hong Kong Stock exchange (Trading symbol: 0250), and has
13,914,504,877 outstanding shares as of the date showing on the beginning
of this Agreement.
7. Transferor agreed to sell all its owned shares of XinHai to Transferee and
Transferee agreed to purchase the shares; Party E and Transferor consent to
bear the related responsibility for Transferor in this Agreement; Party F
and Transferee consent to bear the related responsibility for Transferee in
this Agreement;
8. Transferee has made a prophase investigation on XinHai before signing this
Agreement (Hereafter "Prophase Investigation"). The parties definitely know
that Prophase Investigation is not complete, some of the important items
such as customer information, technical documents and management platforms
have not been disclosed to Transferee, and some of the important files,
certificates and licenses and materials have not been confirmed with the
original documents by Transferee;
9. Transferor promised to provide the above mentioned materials according to
Supplement B "Anaphase Investigation List" on the signing day of this
Agreement and at the same time arrange Transferee's staff to confirm all
the materials. The accomplishment of Anaphase Investigation is the
necessary condition of the first stage payment under this Agreement;
10. Party A, B, C, D, E and F all agreed to cooperate to complete the share
transfer between Transferor and Transferee.
As a matter of XinHai share transfer, the above parties come to the following
agreement in order to assure their obligation and right:
Article 1 Definition
1.1 Other than specifically specified, the following terms in this
Agreement have the meanings as follows:
1.1.1 "Shares of XinHai" means 100% of XinHai shares that Transferor
beneficially own and will be transferred to Transferee accord-
ing to this agreement;
1.1.2 "Related Rights and Interests Transfer" means the domain name
reseller right and related domain name ownership, which is list
-ed in Supplement C of this Agreement or confirmed no transfer
risk by Transferee and signed with Domain Name Registry, which
Transferor and Party E promise to urge XinHai and related
persons jointly deal with the procedure according to the Agree-
ment and will be transferred to the person specified by
Transferee before the last payment, Transferee will not need to
make extra payment for this kind of rights and interests except
the share transfer payment;
1.1.3 "Related Period" means the period from the Agreement signing
day to transfer complete day (inclusive of the above days);
1.1.4 "Business Day" means Monday to Friday (Except statutory
holiday);
1.1.5 "Related Agreement" means Xin Net Telecom Corp. Ltd. (Hereafter
"XinWang") "Share Transfer Agreement" between China Enterprise
AASP Limited and Infornet Investment Ltd., which is based on
this Agreement, to which Transferor guarantor and Transferee
guarantor also have responsibility and obligation;
1.1.6 "The Agreement Signing Date" means the date showing on the
beginning of this Agreement signed by all the Parties;
1.1.7 "The Agreement Effective Date" means the date that the Agree-
ment is legally effective when the conditions stated in Article
4 of the Agreement are met;
1.1.8 "The Closing Date" means the date when Transferee has made the
last stage payment and when the both party sign Supplement H
"Hand over Confirmation";
1.1.9 "Audit Benchmark Date" means the date that Party B and Party A
jointly set up when Party B started Prophase Investigation,
namely August 31, 2002;
1.1.10 "Financial Information" means the information listed in Supple-
ment D;
1.1.11 "Intangible Asset and Qualification" means the intangible asset
and corporate operation qualification which are listed in
Supplement E "Intangible Asset and Qualification List";
1.1.12 "Business and Customer Resource" means the resources listed in
Supplement F "Business and Customer Resource" including but not
limit to high level agent right, low level customers and
agents;
1.1.13 "Hand over Confirmation" means Supplement H, the confirmation
document showing that the transfer under the Agreement has
completed;
1.1.14 "Management Team" means the staff listed in Supplement I;
1.1.15 In this Agreement, except specifically specified, "XinHai"
includes all its subsidiaries and branches;
1.1.16 In this Agreement, except other explanation, the mentioned
people include natural person, legal person and other organiza-
tion; the mentioned any people, company, government institu-
tion, and organization includes its heir; the mentioned
contract or agreement includes its Supplement and addendum; the
mentioned article and Supplement only refers the Article and
Supplement of this Agreement;
1.1.17 The title of this Agreement is used for convenience and is not
applicable to the Agreement explanation.
Article 2 Share Transfer
2.1 In accordance with the Agreement, Transferor agreed to transfer its owned
XinHai shares to Transferee(Party D(A) will get 80% and Party D(B) will
get 20%), namely Party A, B, and C agree to transfer their totally owned
100% of XinHai shares to Transferee;
2.2 After the Agreement is effective, Transferee will beneficially own all the
rights related with XinHai shares according to the Agreement and Transferor
will not own any right related with XinHai shares exclusion of any other
agreement between Transferor and Transferee (Transferor is solely
responsible for all the liabilities coming from XinHai shares before the
Closing Date);
2.3 From the Agreement signing date, Transferee has the right to arrange one or
two representatives to assist Transferor accomplish all the legal
procedures including but not limit to share transfer registration and
related interests transfer in XinHai. The above legal procedures should
acquire a written approval from related government department and obtain a
business license reissued by Industry and Commerce Bureau within 60 days
after the Agreement signing date or some other date agreed by all the
parties (some other date should be within 50 days upon a written approval
by all the parties)
Article 3 Transfer Price and Payment
3.1 Transferor and Transferee agree that the transfer price of the XinWang
shares is RMB (Y) 2,800,000 (Hereafter "Share Transfer Price"). Share
Transfer Price includes related interests cost and Transferor will accept
the payment of Share Transfer Price as an integral.
3.2 All parties agree the payment and condition of Share Transfer Price as
follows:
3.2.1 Prepayment:
3.2.1.1 Transferee will pay Transferor 15% of Share Transfer Price, namely
RMB(Y) 420,000 as prepayment within 5 business days after the
Agreement effective date.
3.2.1.2 From the Agreement effective date, Transferor and Transferee unanimous-
ly agree:
(1) Transferee will send financial representative to XinHai for
understanding and inspecting financial operation including but not
limit to checking XinHai bookkeeping, financial report, cash
deposit and bank statement, and inspecting all the cash flow and
financial standardization process. Transferor agrees to urge
XinHai management team to cooperate;
(2) In accordance with Supplement B "Anaphase Investigation List",
Transferee starts Anaphase Investigation and Transferor agrees to
urge XinHai management team to cooperate;
(3) Transferor and Transferee starts to jointly deal with XinHai
shares transfer process, including but not limit to changing
directors, modifying Article of Association and Industry and
Commerce Bureau approval procedures;
(4) Transferor will urge XinHai, XNET, XinWang, and related people to
start processing related interests transfer listed in Supplement
C;
(5) Transferee has the right to accredit technical staff and operation
staff to XinHai to understand and inspect its technical operation
activity, and Transferor agrees to urge XinHai management team to
cooperate. Transferee and its accredited staff should sign
"Confidential Agreement" with XinHai and the daily accredited
staff should not surpass (3) three persons(including three);
(6) Without written permission of Transferee, Transferor can not
dispose XinHai assets, shares and interests as well as issuing
stock option;
(7) Without written permission of Transferee, Transferor should assure
XinHai management not to change important strategy and policy of
XinHai.
3.2.2 The first stage payment:
3.2.2.1 On the day when all the conditions listed in this item and the first
stage payment conditions of the Related Agreement are met, Transferee
will make first stage payment to Transferor, namely 60% of Share
Transfer Price (Prophase payment will be included in the first stage
payment), total amount of RMB(Y)1,680,000:
(1) Transferor and Transferee have the same cognizance that the share
transfer has no risk. If Industry and Commerce Bureau issues
"Notice of Accepting the Case", the share transfer will be treated
as no risk (If the share transfer accomplishment or cognizance of
no risk time for the Related Agreement is not consistent with this
Agreement, the latter one will be counted.);
(2) After finishing Anaphase Investigation and the written
confirmation is made by Transferor and Transferee (Transferee can
not refuse to sign the confirmation without proper reason).
3.2.2.2 From the date that Transferee makes the first stage payment, Transferor
and Transferee have the following rights and obligations:
(1) Transferee will completely know and inspect the operation and
management of XinHai and has the following approve rights
including but not limit to:
i. Transferee has the final approve right for over
RMB(Y)2,000 (including 2,000) of XinHai's single
payout and over RMB(Y)20,000 (including 20,000)
accumulated monthly payout from the Agreement signing
date. The above payout will be treated as abnormal
payout without written approval of Transferee;
ii. Transferee has the final approve right for all the
contracts, agreements and receipts signed by XinHai
during the related period;
iii. Transferee has the final approve right for changing
or releasing from employee contract of two or more
than two high level managers (referring senior
manager) or technical persons (referring all the
staff of Base Operation Department and Value Added
Business Department), or appointing employee with
over RMB(Y)3,000 monthly salary.
(2) Transferee has the right to obtain all the technical material,
files, and information and hold the operation and maintenance
technology of XinHai business platform and management platform;
(3) Transferee has the right to acquire all the business and customer
materials of XinHai;
(4) Transferee has the right to acquire all the materials related with
the operation of XinHai;
(5) Transferee and transferor will check and verify each item in
accordance with Supplement H "Hand over Confirmation".
3.2.3 The last stage payment:
On the day that all the conditions listed in this item and all the
conditions of the last stage payment in the Related Agreement are met,
Transferee will make the last stage payment to Transferor, namely 40%
of Share Transfer Price, RMB(Y) 1,120,000;
3.2.3.1 Transferor submits the reissued "Business License" to Transferee after
share transfer (If the time of submitting the reissued "Business
License" in the Related Agreement is different, the latter one will be
count.);
3.2.3.2 After finishing transfer the related interests listed in Supplement C
or Transferee affirms the transfer as no risk;
3.2.3.3 Transferor will train the staff send by Transferee and provide all the
information of operation and maintenance of XinWang platforms including
but not limit to password etc.;
3.2.3.4 Transferor and Transferee sign "Hand over Confirmation".
3.2.4 Transferee has the right to release any of the conditions in Item
3.2.1, 3.2.2, and 3.2.3. at anytime in written format.
3.2.5 Payment Confirmation
3.2.5.1 Transferor hereby affirms that Transferee has performed the obligation
of Share Transfer Price payment when Transferor or the third party
specified by Transferor receives Share Transfer Price from Transferee
or the third party specified by Transferee in accordance with the
Agreement;
3.2.5.2 Transferee has completed the obligation of the payment when Transferor
or the third party specified by Transferor receives the last stage
payment from Transferee or the third party specified by Transferee;
3.2.5.3 Transferor should issue a receipt to Transferee on the same day when
Transferor or the third party specified by Transferor receives any
stage payment from Transferee or the third party specified by
Transferee.
3.2.6 Party F covenants and undertakes that on the premise that Transferor
and Party E perform their obligations in time, if Transferee could not
make the payment in time, this sum of payment will turn into due
liability of Transferee which Party F is responsible for.
Article 4 The Agreement effective conditions
The Agreement will take effect on the day when all the following conditions are
met:
4.1 All parties or their authorized representatives sign or seal with the
company seal on the Agreement;
4.2 The Agreement and the Related Agreement are signed at the same time;
4.3 The Agreement and the Related Agreement take effect at the same time;
4.4 Transferor submits with Transferee a written statement issued by XNET which
indicates that until the Agreement signing day XinHai does not have any
liabilities or debt to XNET.
Article 5 Representations , Warranties and Covenant
5.1 Representations, Warranties and Covenant of Transferor and Party E
Transferor and Party E hereby represent, warrant and covenant
respectively and jointly that:
5.1.2 The related rights and abilities of Transferor and Party C
5.1.2.1 Transferor and Party E have full right and authority to enter into this
Agreement on the terms and conditions herein set forth and implement
all the liabilities and responsibilities of the Agreement. Transferor
and Party E were not in breach of the Laws, regulations, statutes and
rules when signing this Agreement. As a matter of XinHai shares trans-
fer, Transferor has obtained all the required authorization and
approval before signing the Agreement, therefore, Transferor can
complete XinHai share transfer on the condition of no restrictions;
5.1.2.2 The authorized representative of Transferor who signs on the Agreement
has been authorized signing the Agreement according to a power of
attorney, Board resolution, or shareholder meeting resolution;
5.1.2.3 Until the Agreement effective day, except that Transferor are
shareholders of XinHai, XinHai is not a subsidiary of any other people
or a company controlled by any other people and no other people has the
right to put forward any requirement on XinHai shares, interests, or
options;
5.1.2.4 There is no lien, mortgage, leasehold, third party right and any
disposal or other any agreement, arrangement or covenant for XinHai
shares that will induce the above actions happening with the share
transfer.
5.1.3 About XinHai
5.1.3.1 XinHai is a company duly incorporated under the laws of P. R. China
(Its registered information seen Supplement A), and has the rights to
hold and carry on its currently holding and carrying on assets and
business according to the Chinese Laws. XinHai has obtained all the
approvals, consents, authorizations, and permissions which are
effective and promissory for its business operation demand. Until the
Agreement Signing Date, XinHai does not have any production, operating
contracts and arrangements which exceed its operating arrange or which
is in abnormal business situation.
5.1.3.2 Validity
XinHai is not in breach of any laws, regulations, and rules, did not
involve any administrative, civil, criminal, economical, or other
dissension, litigation, and arbitration, and was not punished or closed
down by the government; Transferor warrants to let Transferee know any
above proceedings if any thing happens before the Agreement Closing
Date or if any thing would happen after the Agreement Closing Date.
5.1.3.3 Financial Status:
(1) Supplement D is completely showing Asset and Liability of XinHai,
and clearly listing Cash, Fixed asset, Depreciation and
Amortization, Accounts Receivable and Accounts Payable without
pretermission or holding back any debt or unconsummated loss
(including budget loss) until December 31, 2002;
(2) Exclusion of the items listed in Supplement D, XinHai does not
have any unpaid loan, debt or other liability to Bank or third
party. Before the Agreement Effective Date, XinHai did not receive
any written notice of loaner to dispose part or whole of assets of
XinHai;
(3) XinHai is not in breach of any Chinese Tax Law, decree,
regulation, and rule and is not able to be sued by the government
because of tax related problems. All due taxes required by
government law will be paid before the Closing Date (including any
fines caused by late payment)
5.1.3.4 Company Status and Others:
The company registration information, intangible assets, qualification,
business and customer resource, contracts and obligations of XinHai are
consistent with the Supplement of the Agreement. The technologies
XinHai is holding include but no less than guaranteed Domain Name
Registration, Virtual Host, Web Hosting, and Web Site Design etc. well
operating technologies. Until The Agreement Signing Date, XinHai and
XinWang have no less than 180 employees including no less than 30
professional personnel.
5.1.3.5 Contracts:
Until the Agreement Effective Date, XinHai does not sign or arrange any
agreements or legal files that is not necessary for its business and it
has the following features:
a. XinHai is not capable to perform its terms and
conditions;
b. It can be predicted that after performing its terms and
conditions XinHai may not acquire profit or may get
loss;
c. XinHai cannot finish it in time or need extra expenses
to finish it;
d. XinHai may get into trouble or incur abnormal, rigorous,
or extra liability or expenses;
e. XinHai need pay whoever the commission, introduction fee
or tax on books;
f. It is not necessary or not important to carry on XinHai
business.
5.1.4 The Related material and information of XinHai disclosed to Transferee
All the material and information of XinHai (including but not limit to
the information listed in Supplement) in this Agreement and in the
Related Agreement and disclosed to Transferee by Transferor are
integral, true and exact without omitting and holding back.
5.1.5 Proceedings after Audit Benchmark Date
From Audit Benchmark Date (August 31, 2002) to the Closing Date,
Transferor and Party E warrant that XinHai will not do as follows
without written permission of Transferee:
5.1.5.1 Changing corporation format (Except as December 23, 2002,
changing to Limited Corporation);
5.1.5.2 Modifying (increasing or canceling) contracts or Article of
Association of Xin Hai (Exclusion of modification on Decemebr
23, 2002);
5.1.5.3 Appointing director (except appointed by Transferee);
5.1.5.4 Reorganizing, merging or acquiring;
5.1.5.5 Loaning from any third party or its shareholder;
5.1.5.6 Giving any third party or its shareholder surety or mortgage;
5.1.5.7 Selling or purchasing any assets (except listed in Supplement
D);
5.1.5.8 Accepting any debt or liability;
5.1.5.9 Leasing any real estate;
5.1.5.10 Except regular operation, XinHai will not take any action to
incur bad or negative effect on its business;
5.1.5.11 Signing or modifying employment contract with any employee or
increasing salary and benefit (including compensation);
5.1.5.12 Carrying on accommodation or relinquishment of any civil,
criminal, economical or other dissension, lawsuit, and
arbitration (except as disclosed to Transferee and with
written permission of Transferee);
5.1.5.13 Tampering with XinHai accounting books.
5.1.6 Employee Stability
Transferor warrants and urges XinHai to stabilize its employees which
are listed in Supplement I, and keep no less than 80% of managers, 90%
of base business department and value added business department
personnel of XinHai and XinWang, and all the employees of XinHai and
XinWang working for XinHai and XinWang before the Closing Date, who
will not resign within three months after The Closing Date (Except
layoff by Transferee).
5.1.7 Results after XinHai shares Transfer
After Transferee acquires XinHai shares, Transferor warrants the
results as follows:
5.1.7.1 will not release any people's liability for XinHai (no
matter it is restricted by the Agreement or is legal) or
will not bring on XinHai giving up its right under any
agreement or legal documents;
5.1.7.2 will not conflict with or be in breach of other agreements
or legal documents having signed by XinHai; 5.1.7.3 will
not incur its loaner to chase back the current or future
debt immediately; 5.1.7.4 will not be in breach of the
current laws, regulations, decrees and rules.
5.1.8 Competition Prohibition
5.1.8.1 After the Agreement Signing Date, Transferor and Party E
individually and jointly agree not to start any similar
business and activity (including but not limit to operating a
business directly or indirectly through joint venture, or
holding shares of other companies or enterprises) which
directly or indirectly compete with XinHai in China and
outside of China;
5.1.8.2 Transferor and Party E individually and jointly agree not to
use the names and graphs etc. that are the same or similar to
any intellectual properties in the Agreement and Related
Agreements including but not limit to trademark, company
name, brand name (such as "XinWang"), domain name, web
address etc. in any area, any time, and any method.
5.1.9 Transferor and Party E shall not make and approve any action and
negligence that act against above presentations, warrants and covenant
prior to the Closing Date (If the Closing Date for the Related
Agreements is not the same, the latest Closing date shall be used).
Even after the Closing Date, the above presentations, warrants and
covenant shall still be effective.Transferor and Party E confirm that
Transferee signs the Agreement based on the presentations, warrants and
covenant of Transferor and Party E in Article 5.1 of this Agreement.
5.2 Presentations, Warranties and Covenant of Transferee and Party F
Transferee and Party F individually and jointly present, warrant and
covenant that:
5.2.1 Party D(B) is a company duly incorporated under the laws of
China on January 12, 1998;
5.2.2 Party D(B) has all rights, powers and authority for signing this
Agreement and fulfilling the obligations in this agreement, and
has obtained all company's internal consent, permission,
approval, registration, and exemption etc. that are necessary
for Party D(B) to sign this Agreement;
5.2.3 The authorized representative of Party D(B) signs this agreement
according to effective power of attorney, resolution of board of
directors, or resolution of shareholder's meeting;
5.2.4 Transferee and Transferor shall deal with any other affairs
together during the above share transfer process in accordance
with Chinese laws;
5.2.5 If Transferor and Party E do not disobey this Agreement,
Transferee shall make payment for share transfer according to
the stated date and method of the Agreement;
5.2.6 Even after the Closing Date, the above presentations, warrants and
covenants shall still be effective.
5.3 Disclosing Obligation in Time
During related periods, if any party or several parties in this
Agreement find whatever action, activity or event may be badly
inconsistent with its presentations, warrants and covenants or
cause its presentations, warrants and covenants error, the party
or parties shall inform the other party or parties in written
format.
5.4 Independence of the Covenant Article
The covenant Article in this Agreement is independent and can be
divided. Except clearly defined in this Agreement, any covenant article
is not subject to or bound into any other articles in this Agreement.
Article 6 Termination and Cancellation of The Agreement
6.1 The Agreement shall terminate whenever any of the following items happens:
6.1.1 The parties mutually agree to terminate this Agreement in writing;
6.1.2 If Party A and/or Party B and/or Party C and/or Party E breach their
presentation, warrants and covenant as defined in the Agreement, and do
not inform the other parties properly, Transferee requests to terminate
the Agreement;
6.1.3 If Party A and/or Party B and/or Party C and/or Party E do not breach
the agreement, and Transferee does not make payment for share transfer
according to the term in this Agreement, Transferor requests to
terminate the Agreement;
6.1.4 The Agreement is terminated according to Chinese laws, regulations,
and the terms and conditions of this
Agreement;
6.1.5 Any transfer document terminates, or becomes invalid (except as the
documents have been fulfilled or are expired), or cannot be performed
due to any reason; or it is predicted that above mentioned affairs will
happen; or the related responsibility and obligation cannot be
performed or become illegal;
6.1.6 When the Agreement and Related Agreements are completely fulfilled, the
presentations, warrants and covenants of every party shall not be
released due to the termination of the Agreement and Related
Agreements.
6.2 The notice for the termination and/or cancellation of the Agreement shall
be in written format and the termination does not affect the compensation
rights of the party, who obeys the Agreement, to the party who breaches
the Agreement.
Article 7 Transfer of the Agreement
7.1 Without permission of Transferee, Transferor cannot transfer any its
obligation in the Agreement to others.
7.2 Transferee has right to transfer any obligation and any right defined in
the Agreement to others. If Transferee transfers any obligation and any
right defined in the Agreement to other party or parties, Transferee
shall jointly bear the responsibility in accordance with the terms and
conditions of the Agreement.
Article 8 Confidentiality
8.1 Except the requirement of government departments or laws, regulations and
rules, without permission of other parties, any party cannot disclose the
related contents in the Agreement to any third party beyond the Agreement
before the Closing Date (except lawyer and accountant hired by the party);
8.2 Except the requirement of government departments or laws, regulations and
rules, without permission of other parties, any party cannot disclose the
corporate information and technical information of the other parties
obtained in the transaction to any third party after the Closing Date.
Article 9 The Other Matters not Included in the Agreement
Every party shall friendly negotiate any other matters that are not included in
the Agreement and sign supplemental agreement in written format. The
supplemental agreement shall be a binding part of the Agreement and has equal
legal effect.
Article 10 Notice
10.1 All notices shall be submitted in written and shall be sufficiently given
if delivered personally, or transmitted by facsimile or mailed by prepaid
mail (oversea mail should be send by air) addressed to the receiving
Party at its address set below. Each Party shall promptly notify the
others of any change of its address in written format.
10.2 All notice shall be delivered to the receiving party using following
address, fax number and the contact person:
Party A: Mingming Lu
Address: No. 2, LechunFang, Xicheng District, Beijing
Party B: Xin Wei
Address: Suite 1-3-403, Qianmachang ST., Beijing
Party C: Kun Wei
Address: Suite 1-3-403, Qianmachang ST., Beijing
Party D(A): Changhai Yu
Address: Medical Department of Beijing University, 38 Xueyuan Road,
Haidian District, Beijing
Party D(B): Shenzhen Xingpengtai Investment Ltd.
Address: Suite 1804, Sangda Building, Huafa North Road, FuTain District,
Shenzhen
Fax: 0755-83689299
Attention: Guangxing Lu
Transferor guarantor A: Transferor quarantor B:
Xin Net Corp Xiaoqing Du
Address: 950-789 West Pender Street Address: 909-1348 Barclay Street
Vancouver, BC, Canada Vancouver, BC, Canada
Party F: SINO-I.COM LIMITED
Address: Suite 605-6, Bank of America Center, 12 Harcourt Road Central, Hong
Kong
Fax: 00852-2505-4847
Attention: Jiabao Qu
10.3 Under the following situations, it is deemed as delivery:
10.3.1 Submission in person;
10.3.2 If delivery by mail, three (3) business days after the mail is received
by post office (if by airmail, 5 business days);
10.3.3 Submission by fax when the transmission is OK;
10.3.4 To prove the delivery of the notice, the sending party should have
sufficient proof that the notice has been delivered by hand, or the
envelope with the notice has correct address and name of contact person
and has been received by post office; or if delivery by fax, the
sending party should provide automatic confirmation from the fax
machine or the reply of receiving party whichever is first.
Article 11 Liabilities for Breach of the Agreement
11.1 Any of the followings constitutes breach of the Agreement
11.1.1 Breach of payment obligation: If Transferor and Party C are not in
breach of the Agreement, Transferee does not pay the money for mature
share transfer, and Transferee does not pay within five (5) business
days since Transferor sends a written notice, or every party does not
mutually agree to delay the payment;
11.1.1 Breach of liabilities: If any party does not fulfill or obey its
responsibilities, obligations and covenants in the Agreement, or
observant party thinks that the breach of liabilities can be redressed,
but delinquent party does not do any action that satisfies the
observant party within five (5) business days (or other period that
observant party agrees) when delinquent party has received the written
notice from observant party;
11.1.2 Breach of guarantees: Any party breaches its guarantees including but
not limit to its presentations, warrants and covenants; or any of its
presentations, warrants and covenants have untrue, incomplete or
misleading contents;
11.1.3 Fundamental breach of the Agreement: If every party agrees that the
breach of the Agreement is
"serious", the breach of the Agreement is deemed as fundamental breach
of the Agreement;
11.1.4 Dissolution: Any party is dissolved, liquidated closed, reconstructed
and bankrupted, or any party has applied dissolution, liquidation,
closing, reconstruction and bankruptcy, or this procedure has began, or
such effective resolution has passed;
11.1.5 Ownership: The ownership of "XinHai" is changed no matter directly,
indirectly or finally, or related assets are mortgaged.
11.1.6 Approval: The approvals, registrations or procedures, which
Transferor and Transferee should have, have not been obtained, or
expired, or revised;
11.1.7 Disposition of assets: Transferor transfers, mortgages or disposes
"XinHai" in other methods;
11.2 Liabilities for breach of the Agreement
11.2.1 If any breach of the Agreement occurs, or the agreement terminates due
to any other reasons except full performance, Transferor should return
all received payments to Transferee at the day when the agreement
terminates. Delinquent party should pay the compensation that is not
more than total amount of Share Transfer Price to observant party
according to actual loss;
11.2.2 If Transferee does not fundamentally breach the Agreement and
Transferor requests to terminate the Agreement unilaterally (except as
conditions in Article 6.1.5), Transferor shall pay the compensation
that equals to 15% of total amount of Share Transfer Price to
Transferee at the day when the agreement terminates; If Transferor does
not fundamentally breach the Agreement and Transferee requests to
terminate the Agreement unilaterally (except as conditions in Article
6.1.5), Transferee shall pay the compensation that equals to 15% of
total amount of Share Transfer Price to Transferor at the day when the
Agreement terminates;
11.2.3 Any liability for breach of the Agreement does not terminate due to
accomplishment of share transfer. Every party in the Agreement agrees
that any party can chase the liability for breach of the Agreement up
to the period of 36 months (from the Closing Date); But this period
does not include the period that observant party puts forward law suit
to delinquent party for chasing compensation. Observant party shall
send written notice to the delinquent party about related breach of the
Agreement and shall put forward law suit within 24 months after the
observant party has requested the compensation.
11.3 Settlement of Breach of the Agreement
11.3.1 When breach of the Agreement occurs, observant party shall send a
written notice to delinquent party and point out the reasons,
characters, and possible loss due to breach of the Agreement reasonably
and in detail.
11.3.2 Compulsory performance
11.3.2.1 If any party does not perform the Agreement (or breaches the
Agreement), observant party shall force the delinquent party to
perform the Agreement through law procedure;
11.3.2.2 This article cannot prohibit the observant party from taking any other
action or remedy; 11.3.2.3 This article cannot prohibit the observant
party from requesting other compensations beyond loss compensation,
including interests and any other losses or costs from not performing
or completing share transfer;
11.3.2.4 The prerequisite that observant party takes above actions is that
observant party sent a written notice to delinquent party prior to
five (5) business days, and requested the delinquent party to make
proper remedy within five (5) business days, and delinquent party
did not make proper remedy that satisfies observant party within
five (5) business days.
11.3.3 If any guarantees or any articles in the Agreement will or probably
become fundamental breach of the Agreement prior to the Closing Date,
observant party can send a written notice to delinquent party to cancel
the Agreement. Related cancellation action does not have any bad or
negative effect on any observant party's rights and/or compensation
right due to the action of breach of the Agreement. The compulsory
performance under the Agreement does not have any bad or negative
effects because of this Article;
11.3.4 The parties are not responsible for any requirement of the right coming
from laws and regulations which are effective, or altered or cancelled
after the Agreement Signing Date.
Article 12 Miscellaneous
12.1 Revision of the Agreement
When the Agreement is effective, no party can revise the Agreement
without written approvals from every party.
12.2 Exercise of observant party's rights
The action that observant party does not exercise its rights should not
be deemed as giving up. Any single or partially exercise of its rights
should not constitute the obstacle for further exercise of its rights.
The observant party's rights, powers and compensations endued by the
Agreement are accumulated and cannot replace or affect the observant
party's rights, powers and compensations endued by laws.
12.3 Independence of the Articles in the Agreement
If any articles in the Agreement is illegal, invalid or cannot be
preformed, or are declared to be illegal, invalid or unable to perform by
courts and arbitration organizations, the other articles in the Agreement
should still be legal, valid and executable and continue to be effective.
Article 13 Settlements of Disputes
All disputes among the Parties arising from this Agreement shall be settled
through friendly negotiation. In case no settlement can be settled through
negotiation, any Party has the right to submit such dispute(s) to jurisdictional
court.
Article 14 Applicable Laws
The formation of this contract, its validity, interpretation, execution and
settlement of the disputes shall be governed by the related laws of the People's
Republic of China.
Article 15 Force Majeure
15.1 Force Majeure shall mean all events which are unforeseeable and
uncontrolable, the occurrence and consequences of which cannot be avoided
or overcome, and which obstruct or delay any party to perform its
obligation in accordance with the terms and conditions of the Agreement.
Such events shall include earthquakes, typhoons, flood, fire, war, strike
and other similar events which are accepted as Force Majeure.
15.2 If an event of Force Majeure occurs and affects the performance of a
Party's obligations, the Party claiming Force Majeure shall promptly
inform the other Parties and shall provide a written document to explain
related details and the reasons that it cannot fully or partially perform
the Agreement, or delay the performance of the Agreement within fifteen
(15) business days. Whether delaying performance of the Agreement or
canceling Agreement or taking other actions shall be friendly negotiated
by every party and decide what to do in written format within five (5)
business days after every party receives the notice.
Article 16 Supplements
The Agreement includes nine (9) Supplements from Supplements A to Supplements I;
All Supplements are undivided components of the Agreement and have equal legal
effect.
Article 17 Copies
17.1 The Agreement is written and explained in Chinese.
17.2 There are ten (10) original copies of the Agreement. Every party
keeps one original copy of the Agreement. Other two original copies
are backup. Every original copy has equal law effect.
The Agreement is signed by the authorized representatives of Party A, Party B,
Party C, Party D(A), Party D(B), Transferor guarantor A, Transferor guarantor B,
and Party F in Beijing City of People's Republic of China on the date first
above written.
Party A: Mingming Lu
Signature of Authorized Representative: /s/ Xin Wei
Party B: Xin Wei
Signature of Authorized Representative: /s/ Xin Wei
Party C: Kun Wei
Signature of Authorized Representative: /s/ Kun Wei
Party D(A): Changhai Yu
Signature of Authorized Representative: /s/ Changhai Yu
Party D(B): Shenzhen Xingpengtai Investment Ltd.
Signature(Seal) of Authorized Representative: /s/ Jingqian Yu
Transferor guarantor A: Xin Net Corp
Signature of Authorized Representative: /s/ Xiaoqing (Angela) Du
Transferor quarantor B: Xiaoqing Du
Signature of Authorized Representative: /s/ Xiaoqing (Angela) Du
Transferee guarantor (Party F): SINO-I.COM LIMITED
Signature of Authorized Representative: /s/ Pinhai Yu
Date: February 26, 2003
EXHIBIT D (1)
Xin Net Corp.
Pro Forma Financial Information
Introductory paragraph:
The following pro forma financial results show the historical balance sheet as
of March 31, 2003, and the related statements of operations and cash flows for
the three months ended March 31, 2003 and 2002, adjusted to reflect the effect
of no shareholder approval for the transactions entered to sell its China
operations and the related security deposits returned. The disposal of the China
operations refers to two separate transactions as follows: (1) on June 22, 2001,
the company's joint venture partner, Xin Hai Technology Development Ltd., (Xin
Hai) signed an agreement to sell its ISP operations and related assets to a
private company in Beijing for sales proceeds of $700,000, of which $500,000 has
been received and classified as a security deposit in the liabilities section of
the balance sheet; and (2) on February 26, 2003, Xin Hai signed an agreement to
sell its internet-related businesses in China to a subsidiary company of
Sino-I.com Ltd., a company listed on the Hong Kong Stock Exchange, for a total
consideration of RMB 20 million (approximately US$2,500,000), due to lack of
funding and increased market competition. The company has received US$362,430 as
a security deposit for the transaction.
Proposal No. 1 - None of the China operations are approved for sale and the
related security deposits are returned.
3/31/03 Pro Forma Adjustment Pro Forma
Consolidated Balance Sheet Historical Debit Credit Results
----------------------------------------- --------------- ------------- -------------- ---------------
Assets:
Cash and cash equivalents $1,274,108 888,376 b 862,430 d $1,300,054
Accounts receivable - 289,896 b - 289,896
Other current assets 20,785 435,400 a - 456,185
a
Deferred costs - 949,266 - 949,266
Assets to be disposed of 2,696,501 2,696,501 a -
Net assets of discontinued operations 293,420 - 293,420 b -
Investment, at equity 293,204 293,204
Property and equipment, net 11,036 423,459 a 755,340
320,845 b
Goodwill 127,124 127,124
--------------- ---------------
Total Assets $4,716,178 $ 4,171,069
=============== ===============
Liabilities and Stockholders' Equity:
Accounts payable and other current
liabilities $211,911 - 1,080,475 a 1,292,386
Deferred revenue - 2,126,303 a 2,443,624
317,321 b
Security deposit 362,430 862,430 d 500,000 a -
Liabilities to be disposed of 3,706,778 3,706,778 a -
Common stock 41,360 41,360
Additional paid-in capital 8,194,045 8,194,045
Accumulated deficit (7,658,939) - - (7,658,939)
Accumulated other comprehensive loss (141,407) (141,407)
--------------- ---------------
Total liabilities and stockholders'
equity $4,716,178 $ 4,171,069
=============== ===============
3/31/03 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
Condensed statement of Historical Debit Credit Results Historical Debit Credit Results
operations ---------- --------- ---------- --------- ---------- --------- ---------- ---------
Revenues
Tuition fee income $65,350 - - $ 65,350 $ - - - $ -
Internet access cards - - - - - - -
Domain name registration - - 747,214 c 747,214 - - 723,187 c 723,187
E-solutions - - 332,632 c 332,632 - - 285,403 c 285,403
----------- ----------- ---------- -----------
65,350 1,145,196 1,008,590
Cost of revenues
Internet access cards - - - - - - - -
Domain name registration - 447,336 c - 447,336 - 379,410 c - 379,410
E-solutions - 52,082 c - 52,082 - 16,175 c - 16,175
----------- ----------- ---------- -----------
- 499,418 395,585
----------- ----------- ---------- -----------
Gross Profit 65,350 - 645,778 - 613,005
Expenses
Salaries, wages and benefits (52,919) (344,607) c - (397,526) (6,901) (340,350) c - (347,251)
General and administrative (72,604) (462,088) c - (534,692) (57,333) (342,319) c - (399,652)
Other income (expense) (20,397) (6,751) c - (27,148) 24,989 - 378 c 25,367
----------- ----------- ---------- -----------
Loss from continuing operations (80,570) (313,588) (39,245) (108,531)
Provision for income taxes - - - -
Discontinued operations
Loss from assets held for
sale (233,018) - 233,018 c - (69,286) 69,286 c -
Loss from discontinued
operations - - - - - -
----------- ----------- ---------- -----------
Total discontinued operations (233,018) - (69,286) -
----------- ----------- ---------- -----------
Net loss $(313,588) $(313,588) $(108,531) $(108,531)
=========== =========== ========== ===========
Loss per share:
continuing operations (0.00) (0.01) (0.00) (0.01)
discontinued operations (0.01) - (0.00) -
----------- ----------- ---------- -----------
$ (0.01) $ (0.01) $ $
(0.01) (0.01)
=========== =========== ========== ===========
basic weighted average shares
outstanding 41,360,010 41,360,010 21,360,010 21,360,010
=========== =========== ========== ===========
3/31/03 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
Consolidated statements of cash Historical Debit Credit Results Historical Debit Credit Results
flows: ---------- --------- ---------- --------- ---------- ---------- ---------- ----------
Net cash flows provided by (used
in) operating activities $ 485,833 (862,430) d $(376,597) $(173,097) $(173,097)
Cash flows from investing
activities
Purchases of property and
equipment (17,998) (17,998) (48,634) (48,634)
Repayment from ProtectServe
Pacific Ltd. - 360,400 360,400
Investment in The Link
Group, Inc. - (600,300) (600,300)
----------- ---------- ---------- -----------
Net cash flows used in
investing activities (17,998) (17,998) (288,534) (288,534)
Net cash flows used in
financing activities - - (15,056) (15,056)
----------- ---------- ---------- -----------
Increase (decrease) in cash
and cash equivalents 467,835 (394,595) (476,687) (476,687)
Cash and cash
equivalents-beginning of period 1,694,649 1,694,649 1,360,071 1,360,071
----------- ---------- ---------- -----------
Cash and cash equivalents-end
of period $2,162,484 $1,300,054 $883,384 $ 883,384
=========== ========== ========== ===========
Explanatory notes:
a - To reclassify gross amounts of assets and liabilities of
"Assets/Liabilities to be disposed of" assuming the disposal of the
internet-related services, such as domain name registration and e-solutions
services, for the China operations was not approved .
b - To reclassify gross amounts of assets and liabilities of "Net assets of
discontinued operations" assuming the disposal of the ISP services, such as
Internet access cards, for the China operations was not approved.
c - To reclassify gross amounts of results of operations assuming the sale of
the internet-related services provided by China were not approved.
d - To return security deposits assuming the ISP operations ($500,000) and
internet-related operations ($362,430) were not approved for sale.
Note: There is no reclassification of discontinued operations for the ISP
operations for any of the periods presented as there have been no operations
since June 2001.
EXHIBIT D(2)
Xin Net Corp.
Pro Forma Financial Information
Introductory paragraph:
The following pro forma financial results shows the historical balance sheet as
of March 31,2003, and the related statements of operations and cash flows for
the three months ended March 31, 2003 and 2002, adjusted to reflect the
shareholder approval of the sale of the ISP operations in China, but not the
sale of the internet-related services in China. On June 22, 2001, Xin Hai
Technology Development Ltd., the company's joint venture partner, signed an
agreement to sell its ISP operation and related assets to a private company in
Beijing for sales proceeds of $700,000, of which $500,000 has been received and
classified as a security deposit in the liabilities section of the balance
sheet. Management has determined the remaining $200,000 balance is
uncollectible. There is no income tax effect due to the company's loss position.
Proposal No. 2 - Sale of the ISP operations is approved, but sale of internet-
related operations is not approved.
3/31/03 Pro Forma Adjustment Pro Forma
Consolidated Balance Sheet Historical Debit Credit Results
---------------------------------------- --------------- ------------ ------------- --------------
Assets:
Cash and cash equivalents $1,274,108 888,376 c 362,430 e $ 1,800,054
Accounts receivable - - - -
Other current assets 20,785 435,400 c - 456,185
Deferred costs - 949,266 c - 949,266
Assets to be disposed of 2,696,501 2,696,501 c -
Net assets of discontinued operations 293,420 - 293,420 a -
Investment, at equity 293,204 293,204
Property and equipment, net 11,036 423,459 c - 434,495
Goodwill 127,124 127,124
--------------- --------------
Total Assets $4,716,178 $ 4,060,328
=============== ==============
Liabilities and Stockholders' Equity:
Accounts payable and other current
liabilities $211,911 - 1,080,475 c $ 1,292,386
Deferred revenue - - 2,126,303 c 2,126,303
Security deposit 362,430 500,000 a 500,000 c -
362,430 d
Liabilities to be disposed of 3,706,778 3,706,778 c -
Common stock 41,360 41,360
Additional paid-in capital 8,194,045 8,194,045
Accumulated deficit (7,658,939) - 206,580 a (7,452,359)
Accumulated other comprehensive loss (141,407) (141,407)
--------------- --------------
Total liabilities and stockholders'
equity $4,716,178 $ 4,060,328
=============== ==============
Condensed statement 3/31/03 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
of operations: Historical Debit Credit Results Historical Debit Credit Results
---------- --------- ---------- ---------- ---------- --------- ---------- ---------
Revenues
Tuition fee income $65,350 - - $ 65,350 $- - - $ -
Internet access
cards - - - - - - - -
Domain name
registration - - 747,214 d 747,214 - - 723,187 d 723,187
E-solutions - - 332,632 d 332,632 - - 285,403 d 285,403
--------- --------------------- --------- --------- ---------
65,350 1,145,196 - - 1,008,590 1,008,590
Cost of revenues
Internet access
cards - 447,336 d - 447,336 - - - -
Domain name
registration - 52,082 d - 52,082 - 379,410 d - 379,410
E-solutions - - - - - 16,175 d - 16,175
--------- ---------- ---------- ---------
- 499,418 - 395,585
--------- ---------- ---------- ---------
Gross Profit 65,350 - - 645,778 - 613,005
Expenses
benefits (52,919) (344,607) d - (397,526) (6,901) (340,350) d - (347,251)
General and d
administrative (72,604) (462,088) d - (534,692) (57,333) (342,319) - (399,652)
Other income (expense) (20,397) (6,751) d - (27,148) 24,989 - 378 d 25,367
--------- ---------- ---------- ---------
Loss from continuing
operations (80,570) (313,588) (39,245) (108,531)
Provision for income
taxes - - - -
Discontinued operations
Loss from assets held
for sale (233,018) - 233,018 d - (69,286) 69,286 d -
Gain on disposal of
discontinued operations - 700,000 a(293,420) a 206,580 - -
(200,000) b
--------- ---------- ---------- ---------
Total discontinued
operations (233,018) 206,580 (69,286) -
--------- ---------- ---------- ---------
Net loss $(313,588) $(107,008) $(108,531) $(108,531)
========= ========== ========== =========
Loss per share:
continuing operations (0.00) (0.01) (0.00) (0.01)
discontinued operations (0.01) 0.00 (0.00) -
--------- ---------- ---------- ---------
$(0.01) $ (0.00) $(0.01) $(0.01)
========= ========== ========== =========
basic weighted average
shares outstanding 41,360,010 41,360,010 21,360,010 21,360,010
========= ========== ========== =========
Condensed statements of 3/31/02 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
cash flows: Historical Debit Credit Results Historical Debit Credit Results
---------- --------- ---------- ---------- ---------- -------- ---------- ---------
Net cash flows provided by $485,833 (362,430) d - $ 123,403 $(173,097) ($173,097)
(used in) operating
activities
Cash flows from investing
activities
Purchases of property
and equipment (17,998) (17,998) (48,634) (48,634)
Repayment from
ProtectServe Pacific Ltd. - - 360,400 360,400
Investment in The Link
Group, Inc. - - (600,300) (600.300)
-------- ----------- ---------- ----------
Net cash flows used in (17,998) (17,998) (288,534) (288,534)
investing activities
Net cash flows used in
financing activities - - (15,056) (15,056)
-------- ----------- ---------- ----------
Increase (decrease) in 467,835 105,405 (476,687) (476,687)
cash and cash equivalents
Cash and cash
equivalents-beginning of
period 1,694,649 1,694,649 1,360,071 1,360,071
-------- ----------- ---------- ----------
Cash and cash
equivalents-end of period $2,162,484 $1,800,054 $ 883,384 $ 883,384
======== =========== ========== ==========
Explanatory notes:
a - To record gain on disposal after applying security deposit of $500,000 and
sales price of $700,000.
b - To record provision for remaining $200,000 due under contract that is doubt-
ful of collection.
c - To reclassify gross amounts of assets and liabilities of "Assets/Liabilities
to be disposed of" assuming the sale of the internet-related services, such
as domain name registration and e-solutions services, for the China opera-
tions was not approved.
d - To reclassify gross amounts of results of operations assuming the sale of
the internet-related services provided by China was not approved.
e - To return deposit of $362,430 due to lack of shareholder approval of sale of
internet-related operations in China.
EXHIBIT D(3)
Xin Net Corp.
Pro Forma Financial Information
Introductory paragraph:
The following pro forma financial results shows the historical balance sheet as
of March 31, 2003, and the related statements of operations and cash flows for
the three months ended March 31, 2003 and 2002, adjusted to reflect shareholder
approval of the sale internet-related operations in China, but not the ISP
operations in China. On February 26, 2003, Xin Hai signed an agreement to sell
its internet-related services in China to a subsidiary company of Sino-I.com,
Ltd., a company listed on the Hong Kong Stock Exchange, for a total
consideration of RMB 20 million (approximately US$2,500,000), due to lack of
funding and increased market competition. The company has received US$362,430
security deposit for the transaction. There is no income tax effect due to the
company's loss position.
Proposal No. 3 - Sale of internet-related operations is approved, but sale of
ISP operations is not approved.
3/31/03 Pro Forma Adjustment Pro Forma
Consolidated Balance Sheet Historical Debit Credit Results
------------------------------------------ -------------- -------------- ------------- --------------
Assets:
Cash and cash equivalents $1,274,108 2,137,570 a 500,000 b $2,911,678
Accounts receivable - 289,896 b - 289,896
Other current assets 20,785 - - 20,785
Deferred costs - - - -
Assets to be disposed of 2,696,501 2,696,501 a -
Net assets of discontinued operations 293,420 - 293,420 a -
Investment, at equity 293,204 293,204
Property and equipment, net 11,036 320,845 b 331,881
Goodwill 127,124 127,124
-------------- --------------
Total Assets $4,716,178 $3,974,568
============== ==============
Liabilities and Stockholders' Equity:
Accounts payable and other current
liabilities $211,911 - - $211,911
Deferred revenue - - 317,321 b 317,321
Security deposit 362,430 362,430 a - -
Liabilities to be disposed of 3,706,778 3,206,778 a - -
Common stock 41,360 500,000 b 41,360
Additional paid-in capital 8,194,045 8,194,045
Accumulated deficit (7,658,939) - 3,010,277 a (4,648,662)
Accumulated other comprehensive loss (141,407) (141,407)
-------------- --------------
Total liabilities and stockholders'
equity $4,716,178 $3,974,568
============== ==============
Condensed statement 3/31/03 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
of operations: Historical Debit Credit Results Historical Debit Credit Results
---------- --------- ---------- ---------- ---------- --------- ---------- ---------
Revenues
Tuition fee income $ 65,350 - - $ 65,350 $- - - $-
Internet access
cards - - - - - - - -
Domain name
registration - - - - - - - -
E-solutions - - - - - - - -
---------- ------------------------- -----------
65,350 - - 65,350 - -
Cost of revenues
Internet access
cards - - - - - - - -
Domain name
registration - - - - - - - -
E-solutions - - - - - - - -
---------- ------------ ------------ -----------
- - - -
---------- ------------ ------------ -----------
Gross Profit 65,350 - - 65,350 - -
Expenses
Salaries, wages and
benefits (52,919) - - (52,919) (6,901) - - (6,901)
General and
administrative (72,604) - - (72,604) (57,333) - - (57,333)
Other income (expense) (20,397) - - (20,397) 24,989 - - 24,989
---------- ------------ ------------ -----------
Loss from continuing
operations (80,570) (80,570) (39,245) (39,245)
Provision for income
taxes - - - -
Discontinued operations
Loss from assets held
for sale (233,018) - (233,018) (69,286) - - (69,286)
Gain on disposal of
discontinued operations - - 3,010,277 a 3,010,277 - - - -
---------- ------------ ------------ -----------
Total discontinued
operations (233,018) 2,777,259 (69,286) (69,286)
---------- ------------ ------------ -----------
$ $
Net loss $(313,588) 2,696,689 (108,531) $(108,531)
========== ============ ============ ===========
Loss per share:
Continuing operations - - - -
Discontinued operations (0.01) 0.07 - -
---------- ------------ ------------ -----------
($0.01) $0.07 ($0.01) ($0.01)
========== ============ ============ ===========
Basic weighted average
shares outstanding 41,360,010 41,360,010 21,360,010 21,360,010
========== ============ ============ ===========
Condensed statements of 3/31/02 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
cash flows: Historical Debit Credit Results Historical Debit Credit Results
---------- --------- ---------- ---------- ---------- -------- ---------- ---------
Net cash flows provided by
(used in) operating
activities $ 485,833 (500,000) b $(902,543) $(173,097) $(173,097)
(872,707) a
(15,669) c
Cash flows from investing
activities
Purchases of property and
equipment (17,998) (17,998) (48,634) (48,634)
Cash received from sale of
internet-related operations - 2,137,570 a - 2,137,570 - -
Repayment from
ProtectServe Pacific Ltd. - - 360,400 360,400
Investment in The Link
Group, Inc. - - (600,300) (600,300)
----------- ------------ ----------- -----------
Net cash flows used in
investing activities (17,998) 2,119,572 (288,534) (288,534)
Net cash flows used in
financing activities - - (15,056) (15,056)
----------- ------------ ----------- -----------
Increase (decrease) in cash
and cash equivalents 467,835 1,217,029 (476,687) (476,687)
Cash and cash
equivalents-beginning of
period 1,694,649 1,694,649 1,360,071 1,360,071
----------- ------------ ----------- -----------
Cash and cash
equivalents-end of period $2,162,484 $2,911,678 $ 883,384 $ 883,384
=========== ============ =========== ===========
Explanatory notes:
a - To record gain on disposal after applying security deposit of $362,430 and
sales price of $2,500,000 (assume remaining balance of cash received
$2,137,570.)
b - To reclassify net assets of discontinued operations assuming the sale of
ISP operations was not approved and the $500,000 security deposit was
returned.
c - Amount ($15,669) represents cash ($888,376) grouped in "Assets to be
disposed of" less non-cash gain on sale of $872,707.
Note: There was no effect on results of operations or cash flows for 2002.
EXHIBIT D(4)
Xin Net Corp.
Pro Forma Financial Information
Introductory paragraph:
The following pro forma financial results shows the historical balance sheet as
of March 31, 2003, and the related statements of operations and cash flows for
the three months ended March 31, 2003 and 2002, adjusted to reflect shareholder
approval of the sale of the China operations via two separate transactions as
follows: (1) on June 22, 2001, the company's joint venture partner, Xin Hai
Technology Development Ltd., signed an agreement to sell its ISP operations and
related assets to a private company in Beijing for sales proceeds of $700,000,
of which $500,000 has been received and classified as a security deposit in the
liabilities section of the balance sheet.; and (2) on February 26, 2003, Xin Hai
signed an agreement to sell its internet-related businesses in China to a
subsidiary company of Sino-I.com Ltd., a company listed on the Hong Kong Stock
Exchange, for a total consideration of RMB 20 million (approximately
US$2,500,000), due to lack of funding and increased market competition. The
company has received US$362,430 security deposit for the transaction. There is
no income tax effect due to the company's loss position.
Proposal No. 4 - Shareholder approval of both the sale of the (1) ISP and (2)
internet-related operations in China.
3/31/03 Pro Forma Adjustment Pro Forma
Consolidated Balance Sheet Historical Debit Credit Results
------------------------------------------ --------------- -------------- ------------- --------------
Assets:
Cash and cash equivalents $1,274,108 2,137,570 c - $3,411,678
Accounts receivable - - - -
Other current assets 20,785 - - 20,785
Deferred costs - - - -
Assets to be disposed of 2,696,501 - 2,696,501 c -
Net assets of discontinued operations 293,420 - 293,420 a -
Investment, at equity 293,204 293,204
Property and equipment, net 11,036 - - 11,036
Goodwill 127,124 127,124
--------------- --------------
Total Assets $4,716,178 $3,863,827
=============== ==============
Liabilities and Stockholders' Equity:
Accounts payable and other current
liabilities $211,911 - - $211,911
Deferred revenue - - - -
c c
Security deposit 362,430 362,430 - -
Liabilities to be disposed of 3,706,778 3,706,778 c -
Common stock 41,360 41,360
Additional paid-in capital 8,194,045 8,194,045
a
Accumulated deficit (7,658,939) - 206,580 (4,442,082)
3,010,277 c
Accumulated other comprehensive loss (141,407) (141,407)
--------------- --------------
Total liabilities and stockholders'
equity $4,716,178 $3,863,827
=============== ==============
Condensed statement 3/31/03 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
of operations: Historical Debit Credit Results Historical Debit Credit Results
---------- --------- ---------- ---------- ---------- --------- ---------- ---------
Revenues
Tuition fee income $65,350 - - $65,350 $- - - $-
Internet access
cards - - - - - - - -
Domain name
registration - - - - - - - -
E-solutions - - - - - - - -
----------- ------------------------- ----------
65,350 65,350 - -
Cost of revenues
Internet access
cards - - - - - - - -
Domain name
registration - - - - - - - -
E-solutions - - - - - - - -
----------- ------------ ----------- ----------
- - - -
----------- ------------ ----------- ----------
Gross Profit 65,350 - - 65,350 - -
Expenses
Salaries, wages and
benefits (52,919) - - (52,919) (6,901) - - (6,901)
General and
administrative (72,604) - - (72,604) (57,333) - - (57,333)
Other income (expense) (20,397) - - (20,397) 24,989 - - 24,989
----------- ------------ ----------- ----------
Loss from continuing
operations (80,570) (80,570) (39,245) (39,245)
Provision for income
taxes - - - -
Discontinued operations
Loss from assets held
for sale (233,018) - - (233,018) (69,286) (69,286)
Gain on disposal of a
discontinued operations - 700,000 (493,420)a,b3,216,857 - -
3,010,277 c
----------- ------------ ----------- ----------
(233,018) 2,983,839 (69,286) (69,286)
----------- ------------ ----------- ----------
Net loss $(313,588) $2,903,269 $(108,531) $(108,531)
=========== ============ =========== ==========
Loss per share:
continuing operations (0.00) (0.00) (0.00) (0.00)
discontinued operations (0.01) 0.07 (0.00) (0.00)
----------- ------------ ----------- ----------
$(0.01) $0.07 $(0.01) $(0.01)
=========== ============ =========== ==========
basic weighted average
shares outstanding 41,360,010 41,360,010 21,360,010 21,360,010
=========== ============ =========== ==========
Condensed statements of 3/31/02 Pro Forma Adjustment Pro Forma 3/31/02 Pro Forma Adjustment Pro Forma
cash flows: Historical Debit Credit Results Historical Debit Credit Results
---------- --------- ---------- ---------- ---------- -------- ---------- ---------
Net cash flows provided by
(used in) operating $485,833 872,707) c $(402,543) $(173,097) ($173,097)
activities
(15,669) d
Cash flows from investing
activities
Purchases of property and
equipment (17,998) (17,998) (48,634) (48,634)
Cash received from sale
of internet-related - 2,137,570 c- 2,137,570 - -
operations
Repayment from
ProtectServe Pacific Ltd. - - 360,400 360,400
Investment in The Link
Group, Inc. - - (600,300) (600,300)
----------- ------------ ------------ ----------
Net cash flows used in
investing activities (17,998) 2,119,572 (288,534) (288,534)
Net cash flows used in
financing activities - - (15,056) (15,056)
----------- ------------ ------------ ----------
Increase (decrease) in cash
and cash equivalents 467,835 1,717,029 (476,687) (476,687)
Cash and cash
equivalents-beginning of
period 1,694,649 1,694,649 1,360,071 1,360,071
----------- ------------ ------------ ----------
Cash and cash
equivalents-end of period $2,162,484 $3,411,678 $883,384 $883,384
=========== ============ ============ ==========
Explanatory notes:
a - To record gain on disposal after applying security deposit of $500,000 and
sales price of $700,000.
b - To record provision for remaining $200,000 due under contract that is doubt-
ful of collection.
c - To record gain on disposal after applying security deposit of $362,430 and
sales price of $2,500,000 (assume remaining balance of cash received
$2,135,570.)
d - Amount ($15,669) represents cash ($888,376) grouped in "Assets to be
disposed of" less non-cash gain on sale of $872,707.
Note: There was no effect on results of operations or cash flows for 2002.
BALLOT
--------------------------------------------------------------------------------
XIN NET CORP.
#950-789 W. Pender St, Vancouver, BC, Canada V6C 1H2
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS, ______________, 2003
The undersigned hereby appoints Angela Du proxy, with full power of
substitution, for and in the name or names of the undersigned, to vote all
shares of Common Stock of Xin Net Corp. held of record by the undersigned at the
Annual Meeting of Stockholders to be held on ____________, 2003, at 10:00 AM, at
#950-789 W. Pender Street, Vancouver, BC Canada V6C 1H2, and at any adjournment
thereof, upon the matters described in the accompanying Notice of Annual Meeting
and Proxy Statement, receipt of which is hereby acknowledged, and upon any other
business that may properly come before, and matters incident to the conduct of,
the meeting or any adjournment thereof. Said person is directed to vote on the
matters described in the Notice of Annual Meeting and Proxy Statement as
follows, and otherwise in their discretion upon such other business as may
properly come before, and matters incident to the conduct of, the meeting and
any adjournment thereof.
1. To elect a Board of five (5) directors to hold office until the next annual
meeting of stockholders or until their respective successors have been
elected and qualified:
Nominees: Xiao-qing (Angela) Du, Ernest Cheung, and Maurice Tsakok
Stephen Hutchison, Kun Wei
[_] FOR: nominees listed above (except as marked to the con-
trary below).
[_] WITHHOLD authority to vote for nominee(s) specified below
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), write
the applicable name(s) in the space provided below.
-------------------- --------------------- --------------------
2. To authorize the sale of Xin Net Telecom Corp., the domain name registra-
tion business of the company to Sino-i.com Limited.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To approve the agreement signed on June 22, 2001 to sell Company ISP assets
to Beijing Sino Soft Intel Information Technology Ltd.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To amend the Articles of Incorporation to increase the authorized capital to
300 million common shares at $.001 par value and 300 million preferred
shares at $.001 par value in such classes or series and with such rights and
privileges as the Board may hereafter determine.
[_] FOR [_] AGAINST [_] ABSTAIN
5. To ratify the designation of Clancy and Co., PLLC, as independent
accountants for the period ending December 31, 2001:
[_] FOR [_] AGAINST [_] ABSTAIN
6. To transact such other business as may properly come before the Annual
Meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND RETURN THIS PROXY
CARD IN THE ENCLOSED ENVELOPE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS
INDICATED, WILL BE VOTED "FOR" THE STATED PROPOSALS.
----------------------------------------
Signature of Stockholder
----------------------------------------
Signature if held jointly
Dated: __________________________
IMPORTANT: If shares are
jointly owned, both owners
should sign. If signing as
attorney, executor,
administrator, trustee,
guardian or other person
signing in a representative
capacity, please give your
full title as such. If a
corporation, please sign in
full corporate name by
President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.